EHSI 10-Q
Elite Health Systems Inc. (EHSI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
For the transition period from to .
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
(I.R.S. Employer |
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incorporation or organization) |
Identification No.) |
(Address of principal executive offices)
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(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ☐ |
Accelerated filer ☐ |
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Smaller reporting company |
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Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of April 30, 2025 was
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Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations. |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk. |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ELITE HEALTH SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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March 31, |
December 31, |
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2025 |
2024 |
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(Unaudited) |
(Audited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
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Other current assets |
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Due from related parties |
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Stock subscriptions receivable |
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Total current assets |
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Other assets: |
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Due from related parties |
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Total other assets |
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Property and equipment: |
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Capitalized software development |
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Operating lease right-of-use asset |
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Total property and equipment |
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TOTAL ASSETS |
$ | $ | ||||||
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LIABILITIES |
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Current liabilities: |
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Operating lease right-of-use liability - current portion |
$ | $ | ||||||
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Accounts payable and accrued expenses |
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Total current liabilities |
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Operating lease right-of-use liability - net of current portion |
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Guarantee liability |
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Total liabilities |
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EQUITY |
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Common stock - par value $; |
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Stock to be issued |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' equity |
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TOTAL LIABILITIES AND EQUITY |
$ | $ | ||||||
See accompanying notes to the consolidated financial statements
ELITE HEALTH SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three Months Ended |
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March 31, |
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2025 |
2024 |
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Revenue |
$ | $ | ||||||
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Costs and expenses: |
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Selling, general and administrative |
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Total expense |
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Operating Income ( loss) |
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Total other income (expense) |
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Interest income (expense) |
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Income (loss) from investments in unconsolidated entities, net |
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Total other (expense) |
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Income (loss) before income taxes |
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Reversal of provision for income taxes |
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Net Income (loss) |
( |
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Net income (loss) attributable to noncontrolling interests |
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| Net income (loss) attributable to Elite Health Systems Inc. | $ | ( |
) | $ | ( |
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| Basic and diluted net income (loss) per share attributable to Elite Health Systems Inc | $ | ( |
) | $ | ( |
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Weighted average common shares outstanding, basic and diluted |
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The accompanying notes to condensed consolidated financial statements are an integral part hereof.
ELITE HEALTH SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
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Common Stock |
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Number of |
Additional Paid-In |
Stock to |
(Accumulated Deficit) / Retained |
Total |
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Shares |
Amount |
Capital |
Be Issued | Earnings |
Equity |
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Balance - December 31, 2023 |
$ | $ | $ | ( |
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Issuance of common stock |
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Common stock subscribed |
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Stock to be issued |
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Net loss for the year ended |
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December 31,2024 |
- | ( |
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Balance - December 31, 2024 |
$ | $ | $ | $ | ( |
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Issued from prior period |
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Issuance of common stock |
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Net loss for the three months ended |
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March 31,2025 |
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Balance - March 31, 2025 |
$ | $ | $ | $ | ( |
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See accompanying notes to the consolidated financial statements
ELITE HEALTH SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three Months Ended |
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March 31, |
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2025 |
2024 |
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Cash flows from operating activities: |
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Net loss |
$ | ( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of operating lease right-of-use asset |
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Income from investments in unconsolidated entities, net |
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Changes in: |
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Income taxes payable |
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Other current assets |
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Stock subscription receivable |
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Due from related parties |
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Accounts payable and accrued expenses |
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Operating lease right-of-use liability |
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Net cash provied by (used in) operating activities |
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Cash flows from investing activities: |
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Receipt of distributions outstanding |
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| Capitalization of software development costs | ( |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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Sale of shares |
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Issuance of common stock |
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Net cash provided by (used in) financing activities |
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Net change in cash and cash equivalents |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period |
$ | $ | ||||||
The accompanying notes to condensed consolidated financial statements are an integral part hereof
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Preparation
Organization and Business
Elite Health Systems Inc, formerly U.S. NeuroSurgical Holdings, Inc. through its wholly-owned subsidiaries, is developing a business to provide Medicare Advantage plans and related services, concentrating initially in California and Nevada. As used herein, unless the context indicates otherwise, the term "Company" and "Registrant" means Elite Health Systems Inc. and its wholly-owned subsidiary, Elite Health Systems Holdings Inc. (“EHSH”), and the wholly-owned subsidiaries of EHSH, U.S. NeuroSurgical Physics, Inc., USN Corona, Inc., Elite Health Plan, Inc. and Elite Health Plan of Nevada, Inc.
Company Background.
The Company was previously engaged in the ownership and operations of radiation treatment centers. Most of these businesses have been sold or wound down, and the Company has been actively pursuing opportunities to expand to other businesses that could benefit its current operations and relationships. Effective October 1, 2021, the Company acquired all of the outstanding shares of capital stock of Elite Health Plan, Inc., a California corporation (“Elite Health”) and, in exchange therefor, the former holders of Elite Health were issued newly-issued shares of EHSH, which following the transaction represent
The Company has determined that its best opportunity for long term success is to concentrate its efforts and resources on establishing a managed care organization that will develop and operate Medicare Advantage plans for, and provide related health services to, seniors in California and other areas in the U.S., and could pursue growth through other commercial opportunities and strategic transactions, including partnerships, acquisitions or mergers related and complementary to these activities and services.
In furtherance of this plan, Elite Health Plan, Inc. has submitted documentation for a Knox-Keene license to offer managed health care plans in California. In addition, EHSH recently formed Elite Health Plan of Nevada, Inc. to apply for a license to operate a Medicare Advantage plan in Nevada. Elite Heath Plan, Inc. and Elite Health Plan of Nevada, Inc., both 100% owned by EHSH and managed and operated in a similar manner, are collectively referred to herein as “Elite Health.” In California, Elite Health has taken preliminary steps toward identifying a network of providers who are well-versed in Medicare Advantage plans and addressing the healthcare needs of seniors in the communities in which they practice. Elite Health currently has no revenue, and will not be in a position to generate significant revenue while it seeks to obtain a license to operate a Medicare Advantage plan in California. The success of Elite Health will depend, in part, on timely obtaining all necessary approvals and gaining access to a sufficient network of providers and enrolling a critical level of subscribers. There can be no assurance that the Company and Elite Health will be successful in obtaining the necessary licenses to operate Medicare Advantage plans in any jurisdiction or be effective in establishing the network of providers and developing the systems required to operate a managed care business.
The Company’s headquarters are located at 1131 W 6th Street, Suite 225, Ontario, CA 91762 and its telephone number is (949) 249-1170.
Recent Accounting Pronouncements
FASB ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
The FASB issued ASU 2023-07 on November 27, 2023, which is intended to improve reportable segment disclosure requirements. Under previous guidance, while entities were required to disclose segment revenue and measure of profit or loss, there has been limited disclosure around the reporting of segment expenses. In addition to enhanced disclosures about significant segment expenses, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company has adopted the requirements of the expanded segment disclosures as of December 31, 2024.
The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation to noncontrolling interests in consolidated financial statements. The guidance requires noncontrolling interests to be reported as a component of equity separate from the parent’s equity and purchases and sales of equity interests, that do not result in a change in control, to be accounted for as equity transactions. In addition, net (loss) income attributable to noncontrolling interests are to be included in net (loss) income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value, with any gain or loss recognized in net (loss) income.
All amounts are shown in nearest thousands in the Consolidated Financial Statements and accompanying notes therein.
Liquidity and Going Concern
In fiscal year 2024, the Company incurred a net loss of $
However, management has considered its plans to continue the Company as a going concern, concentrating on the establishment and operation of managed health care plans. The Company raised gross proceeds of approximately $
Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying Condensed Consolidated Financial Statements and notes do not include all disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Accordingly, these statements should be read in conjunction with the Company’s most recent annual Consolidated Financial Statements.
Consolidated results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. The only change to the Company’s equity in the three months ended March 31, 2025 and 2023 was net loss for the periods and issuance of common stock.
The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation to noncontrolling interests in consolidated financial statements. The guidance requires noncontrolling interests to be reported as a component of equity separate from the parent’s equity and purchases and sales of equity interests, that do not result in a change in control, to be accounted for as equity transactions. In addition, net (loss) income attributable to noncontrolling interests are to be included in net (loss) income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value, with any gain or loss recognized in net (loss) income.
The Company recognizes revenue in accordance with two different accounting standards: 1) Topic 606 and 2) Accounting Standards Codification (“ASC”) Topic 842, Leases. However, the Company is not currently generating revenue.
In accordance with ASC 350-40, Internal Use Software, the Company capitalizes certain internal use software development costs associated with creating and enhancing internally developed software related to its platforms. Software development activities generally consist of three stages (i) the research and planning stage, (ii) the application and development stage, and (iii) the post-implementation stage. Costs incurred in the planning and post-implementation stages of software development, or other maintenance and development expenses that do not meet the qualification for capitalization are expensed as incurred. Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized. These costs relate to services provided by a vendor that are directly associated with the software projects. These software development and acquired technology costs will be amortized on a straight-line basis over the initial term of the license agreement with the vendor through December 31, 2030.
Basic loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The numerator for the calculation of basic and diluted earnings per share is net loss and the denominator is the weighted-average number of common shares outstanding during the period.
The tables below present financial information associated with our leases.
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Classification |
March 31, |
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Assets |
2025 |
2024 |
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Long-term |
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Operating lease assets |
Operating lease right-of-use asset |
$ | $ | ||||||
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Total leased assets |
$ | $ | |||||||
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Liabilities |
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Current |
- | ||||||||
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Operating lease liabilities |
Operating lease right-of-use liability - current portion |
$ | $ | ||||||
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Long-term |
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Operating lease liabilities |
Operating lease right-of-use liability - net of current portion |
$ | $ | ||||||
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Total lease liabilities |
$ | $ | |||||||
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Lease Cost |
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Operating lease cost |
Selling, general and administrative |
$ | $ | ||||||
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Net lease expense |
$ | $ | |||||||
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Maturity of lease liabilities (as of March 31, 2025) |
Operating lease |
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2025 |
$ | |||
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2026 |
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Total |
$ | |||
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Less amount representing interest |
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Present value of lease liabilities |
$ | |||
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Discount rate |
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Note B– Boca Oncology Partners
During the first quarter of 2011, the Company, through the formation of a joint venture, in which it had a noncontrolling interest, participated in the formation of Boca Oncology Partners, LLC (“BOP”), for the purpose of owning and operating a cancer center in Boca Raton, Florida. In June 2011, BOPRE, an affiliated entity, purchased a
In June 2012, BOPRE purchased an additional
During the years ended December 31, 2018, and 2017, several investors relinquished part of their ownership interest in BOPRE, and those interests were distributed among the remaining investors in relationship to their percentages owned. During 2021 and 2022, additional members relinquished their ownership to EHSHI. As a result, the Company now holds a
In September 2024, the Company sold its interest in BOPRE to the remaining members for $
The following tables present the summarized financial information of BOPRE:
BOPRE Condensed Income Statement Information
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Three Months Ended |
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March 31, |
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2025 |
2024 |
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Rental Income |
$ | $ | ||||||
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Net income |
$ | $ | ||||||
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EHSHI's equity in earnings of BOPRE |
$ | $ | ||||||
BOPRE Condensed Balance Sheet Information
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March 31, |
December 31, |
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2025 |
2024 |
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Current assets |
$ | $ | ||||||
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Noncurrent assets |
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Total assets |
$ | $ | ||||||
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Current liabilities |
$ | |||||||
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Noncurrent liabilities |
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Equity |
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Total liabilities and equity |
$ | $ | ||||||
Note C- CB Oncology Partners
CBOP was organized September 1, 2017, to acquire the rights of the new center from FOP. EHSHI originally had a
Effective November 15, 2019, FOP transferred to, and CBOP assumed, a loan with BB&T bank, that it had entered in order to finance the purchase of equipment and build out of the new center, as well as the associated property and equipment. In addition, CBOP and BB&T agreed to reduce the monthly loan repayments for the next nine months, and to extend the term of the loan from November 2024 to July 2025. In July 2020 CBOP and BB&T further agreed to reduce the monthly payments for the life of the loan and extended the loan to July of 2027.
In June 2020, CBOP made a $
During the year ended December 31, 2024, the Company did not lend any additional funds to CBOP. During the year ended December 31, 2023, the Company advanced $
Due to loans made to CBOP, CBOP is considered to be a variable interest entity of the Company. However, as the Company is not deemed to be the primary beneficiary of CBOP, since it does not have the power to direct the operating activities that most significantly affect CBOP’s economic performance, the entity is not consolidated, but certain disclosures are provided herein.
The Company was approached by one of the investors in CBOP where the investor would payoff the outstanding loan, releasing the Company of its guarantee in exchange for the Company’s ownership interest in CBOP. The Company has evaluated the proposal and in return wrote off the remaining value of amounts due the Company from CBOP of $
The following table presents the summarized financial information of CBOP:
CBOP Condensed Income Statement Information
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Three Months Ended |
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2025 |
2024 |
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Patient revenue |
$ | $ | ||||||
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Net (loss) income |
$ | ( |
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EHSHI's equity in (loss) income of CBOP |
$ | ( |
) | $ | ( |
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CBOP Condensed Balance Sheet Information
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March 31, |
December 31, |
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2025 |
2024 |
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Current assets |
$ | $ | ||||||
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Noncurrent assets |
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Total assets |
$ | $ | ||||||
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Current liabilities |
$ | $ | ||||||
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Noncurrent liabilities |
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Deficit |
( |
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Total liabilities and stockholder's deficit |
$ | $ | ||||||
Note D – Elite Health
Background. Elite Health Plan, Inc. was formed in 2017 with the purpose of establishing a managed care organization that will develop and operate Medicare Advantage plans for seniors in California. In addition to pursuing the required authorizations, including a Knox-Keene license from California’s Department of Managed Health Care (“DMHC”), necessary for the operation of full service health plans in California, and approval from the Centers for Medicare & Medicaid Services (“CMS”), the Company is considering engaging in related businesses and health services to support this mission.
Medicare Advantage plans are offered by private companies and are regulated by the federal government and licensed by the state in which those companies operate. Once its plans are approved, Elite Health expects to initially operate in the California counties of San Bernadino, Riverside, and Los Angeles, with the objective of addressing the growing number of Medicare eligible seniors in those markets. The Company then expects to apply to the State of Nevada and begin operations in Clark County, Nevada. Because of the collective experience of its founders and affiliates as physicians, software executives, and health plan administrators, we believe that Elite Health will be positioned to bring to California and Nevada a comprehensive, community-based and cost-effective health care management service solution for these communities.
Filing in California. The Company initially applied for a license to operate a Medicare Advantage plan in Nevada. However, the Company determined that a reciprocity agreement between California and Nevada would more result in a more expedient path to licensing in Nevada would be to secure approvals in California first. For this reason, Elite Health is focusing on completing the process toward obtaining a Knox-Keene license in California, and securing necessary approvals from CMS with a final submission of plan details in June 2025. There can be no assurance that a license will be issued or, if issued, it will be done in a timely manner.
Note E – Internal Use Software
In accordance with ASC 350-40, Internal Use Software, the Company capitalizes certain internal use software development costs associated with creating and enhancing internally developed software related to its platforms. Software development activities generally consist of three stages (i) the research and planning stage, (ii) the application and development stage, and (iii) the post-implementation stage. Costs incurred in the planning and post-implementation stages of software development, or other maintenance and development expenses that do not meet the qualification for capitalization are expensed as incurred. Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized. These costs relate to services provided by a vendor that are directly associated with the software projects. These software development and acquired technology costs will be amortized on a straight-line basis over the initial term of the license agreement with the vendor through December 31, 2030.
Note F – Income Taxes
The Company’s income tax rate, which includes federal and state income taxes, was
Note G – Segment Reporting
The Company applies ASC 280, Segment Reporting, in determining reportable segments for its financial statement disclosure. Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer (“CEO”). The Company has determined that it operates as a single operating segment and has one reportable segment."
Note H – Transactions with Related Parties
The Company recorded compensation with directors and officers of the Company for the year ended December 31, 2024 consisting of stock grants valued at $
Note I – Subsequent Events
On April 25, 2025 the Company’s subsidiary, Elite Health Plan, Inc. (“Plan”) entered into a Note and Line of Credit with Rao R. Yalamanchili (“Lender”) for $
Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations.
Critical Accounting Policies
The Condensed Consolidated Financial Statements of Elite Health Systems Inc. and subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America. As such, some accounting policies have a significant impact on amounts reported in the Condensed Consolidated Financial Statements. A summary of those significant accounting policies can be found in Note B to the Consolidated Financial Statements, in our 2024 Annual Report on Form 10-K. In particular, judgment is used in areas such as determining and assessing possible asset impairments, including investments in, and advances, to unconsolidated entities.
The following discussion and analysis provides information which the Company’s management believes is relevant to an assessment and understanding of the Company’s results of operations and financial condition. This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto appearing elsewhere herein.
Recent events
None
Results of Operations
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024
Selling, general, and administrative expenses of $427,000 for the first quarter of 2025 were 10% lower than the $476,000 incurred during the comparable period in 2024, due mostly to the start-up costs for Elite Health Plan.
During the three months ended March 31, 2025, the Company recognized $0 gain from its investment in unconsolidated entities compared to $2,000 during the same period in 2024.
During the three months ended March 31, 2025 the Company recorded no income tax benefit or provision and recorded an income tax benefit of $163,000 during the quarter ended March 31, 2024.
For the three months ended March 31, 2025, the Company reported a net loss of $424,000 as compared to $312,000 for the same period a year earlier. The net loss was primarily due to investment in Elite prior to generation of any revenue.
Liquidity and Capital Resources
The Company’s primary sources of liquidity are from equity transactions discussed below.
Net cash used in operating activities for the three months ended March 31, 2025, was $297,000 as compared to $461,000 for the same period a year earlier. This change is primarily due to the Company using cash to invest in the Elite business During the three months ended March 31, 2025, the Company received $0 of distributed earnings from unconsolidated entities as compared to $2,000 in the first three months of 2024.
On January 16, 2024, the Company held an initial closing of a private placement of shares of the Company’s common stock to raise gross proceeds of not less than $1,000,000, and up to $2,000,000, at a price of $0.50 per share. Since the initial closing, the Company amended the terms of the private placement to raise up to $5,500,000 and raised total proceeds of an aggregate of $5.8 million. As a result of these issuances, as of March 31, 2025, there were outstanding 21,409,924 shares of the Company’s Common Stock.
For this sale of securities in connection with private placement, no general solicitation was used, no commissions were paid, all participants in the private placement were accredited investors, and the Company relied on the exemption from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering.
The Company presently intends to use the net proceeds from the private placement principally to execute the plan of Elite Health to establish a managed care organization that will operate as a Medicare Advantage plan for seniors.
The Company presently intends to use the net proceeds from the private placement principally to execute the plan of Elite Health to establish a managed care organization that will operate as a Medicare Advantage plan for seniors.
In fiscal year 2024, the Company incurred a net loss of $2,055,000 compared to $816,000 in fiscal year 2023. The Company is seeking state and Federal approval to operate as a Medicare Advantage plan and is in the development stage of preparing to operate. As a result, it has no revenue and significant expenses. The Company has funded operations through the sale of common stock. The Company had an accumulated deficit in stockholders’ equity of $4,869,000 and $4,445,000 at March 31, 2025 and December 31, 2024, respectively; cash and cash equivalents of $3,696,000 and $4,034,000 at March 31, 2025 and December 31, 2024, respectively; and working capital of $3,679,000 and $4,155,000 at March 31, 2025 and December 31,2024, respectively. In addition, the Company currently does not have access to capital through a line of credit nor other readily available sources of capital. Together, these factors raised substantial doubt regarding the Company’s ability to continue as a going concern at March 31, 2025. The Company raised an additional $5,825,000 through the private sale of 11,650,000 shares of Common stock and in addition to 475,000 shares issued as compensation to certain officers and directors, bringing the total outstanding to 21,409,924 shares as of March 31, 2025 and 19,984,924 at December 31, 2024.
However, management has considered its plans to continue the Company as a going concern, concentrating on the establishment and operation of managed health care plans. The Company raised gross proceeds of approximately $5.8 million in support of this business opportunity through the sale of its Common Stock in a private placement and believes it has access to additional capital through 2025. Additionally, the Company believes that these activities and resulting expenses can be managed to the level of cash resources on hand and expected to be raised. Management believes its plan alleviates the substantial doubt and that it will be successful in its planned business initiatives and will be able to continue as a going concern through at least the next twelve months. However, there can be no assurance that sources of capital will be available to the Company at that time or, if available, can be obtained on terms favorable to the Company.
Risk Factors
We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The factors listed under the caption “Risk Factors” in Annual Report on our Form 10-K for the fiscal year ended December 31, 2024, have affected or could affect our actual results and could cause such results to differ materially from those expressed in any forward-looking statements made by us. Investors should carefully consider these risks and speculative factors inherent in and affecting our business and an investment in our common stock.
Disclosure Regarding Forward Looking Statements
The Securities and Exchange Commission encourages companies to disclose forward looking information so that investors can better understand a company's future prospects and make informed investment decisions. This document contains such "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements anticipating future growth in revenues and cash flow. Words such as "anticipates," "estimates," "expects," "projects," "targets," "intends," "plans," "believes," "will be," "will continue," "will likely result," and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify such forward-looking statements. Those forward-looking statements are based on management's present expectations about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and the Company is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of such changes, new information, future events or otherwise.
The Company operates in a highly competitive and rapidly changing environment and in businesses that are dependent on our ability to: achieve profitability; increase revenues; sustain our current level of operations; maintain satisfactory relations with business partners; attract and retain key personnel; maintain and expand our strategic alliances; and protect our intellectual property. The Company's actual results could differ materially from management's expectations because of changes in such factors. New risk factors can arise and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Factors that could cause actual results to differ materially from those currently anticipated include the following:
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Uncertainties relating to our ability to successfully implement our strategy of developing a Medicare Advantage plan under our Elite Health subsidiaries; |
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Uncertainty over our ability to achieve a Medicare Advantage license in California in a timely manner, acquire managed health consumers in California, expand consumer enrollment beyond this initial state, or diversify and expand our portfolio of products and services, our business and results of operations will be significantly impaired; |
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Our ability to raise capital in the future on satisfactory terms; |
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Our financial condition and liquidity; |
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Uncertainty over our ability to successfully implement management's plan to improve liquidity, including the ability to manage costs, systems and growth; |
All forward looking statements should be considered in the context of the risks and other factors described above and in "Risk Factors" (Part I, Item 1A of the Company’s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2024), "Quantitative and Qualitative Disclosures about Market Risk" (Part II, Item 7A of the Company’s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2024), and "Management’s Discussion and Analysis" (Part I, Item 2 of this Form 10-Q). We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.
Investors should also be aware that while the Company might, from time to time, communicate with securities analysts, it is against the Company's policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, investors should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Company has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts or others contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.
In addition, the Company’s overall financial strategy, including growth in operations, maintaining financial ratios and strengthening the balance sheet, could be adversely affected by increased interest rates, construction delays or other transactions, economic slowdowns and changes in the Company’s plans, strategies and intentions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We do realize that we are a very small company and as a small company with only the officers and directors participating in the day to day management, with the ability to override controls, each officer and director has multiple positions and responsibilities that would normally be distributed among several employees in larger organizations with adequate segregation of duties to ensure the appropriate checks and balances. Because the Company does not currently have a separate chief financial officer, the Chief Executive Officer performs these functions with the support of one of the Company’s outside directors who assists in the reporting and disclosure process (the “Lead Director”).
Our management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this report for the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, to be recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, due to the material weakness in internal control over financial reporting described below.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company.
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company.
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2024. A material weakness is a control deficiency, or a combination of control deficiencies in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the assessment described above, management identified the following material weakness as of September 30, 2024: The Company did not maintain sufficient qualified personnel with the appropriate level of knowledge, experience and training in the application of accounting principles generally accepted in the United States of America and in internal controls over financial reporting commensurate with its financial reporting requirements. Specifically, effective controls were not designed and in place to ensure that the Company maintained, or had access to, appropriate resources with adequate experience and expertise in the area of financial reporting for transactions such as investments in unconsolidated entities, related party receivables, impairments, lease accounting, accounting for business combinations, income taxes, and to properly assess the application of new accounting pronouncements. The Company has brought on a consultant with experience in these matters and believes this material weakness has been remediated.
Changes in Internal Control over Financial Reporting
While there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2025, management is in the process of developing plans to remediate the material weakness identified above.
None
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities Unregistered Sales of Equity Securities and Use of Proceeds
On January 16, 2024, the Company held an initial closing of a private placement of shares of the Company’s common stock to raise gross proceeds of not less than $1,000,000, and up to $2,000,000, at a price of $0.50 per share. Since the initial closing, the Company amended the terms of the private placement to raise up to $5,500,000 and raised total proceeds of an aggregate of $5.8 million. As a result of these issuances, as of March 31, 2025, there were outstanding 21,409,924 shares of the Company’s Common Stock.
For this sale of securities in connection with private placement, no general solicitation was used, no commissions were paid, all participants in the private placement were accredited investors, and the Company relied on the exemption from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering.
The Company presently intends to use the net proceeds from the private placement principally to execute the plan of Elite Health to establish a managed care organization that will operate as a Medicare Advantage plan for seniors.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
applicable.
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32.1 |
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101 |
Interactive Data Files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 in iXBRL (Inline eXtensible Business Reporting Language). Pursuant to Regulation 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability. |
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104 |
The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Elite Health Systems, Inc. (Registrant) |
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Date: May 15, 2025 |
By: |
/s/ Prasad Jeereddi |
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Prasad Jeereddi |
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Director, President and |
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| Principal Financial Officer | |||
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