It is very expensive and difficult for an emerging idea to be able to work with the numerous state and federal regulations in effect today. A great deal of Mr. Frohreich’s time and our Company resources over the last three years has been utilized maintaining regulatory compliance and developing our preferred stock offering. We wish to share with our stockholders that we believe this is a very worthwhile cause and will continue to pursue sources of funding to enable us to continue to be SEC compliant and to fulfill this business plan.
Revenues during the twelve months ended December 31, 2009 were $9,524 with cost of sales of $351 yielding a gross profit of $9,173 compared to $113,313 in revenues for the same period in 2008 with a cost of sales of $74,986 and a gross profit of $38,327.
Operating expenses and other costs during the twelve-month period ending December 31, 2009 were $158,821 resulting in an operating loss of $149,648 compared to the operating expenses of $280,752 for the twelve months ending December 31, 2008 with an operating loss of $242,425.
The major portion of our 2009 operating expenses has come from SEC compliance requirements for our 2008 10K, three 10Q filings, and the four amendments of the S-1 Preferred Share Offering. In addition, in 2009, we expensed $55,312 for the amortization of our database and was included in our total operating expenses.
It is anticipated that once the Form S-1 registration statement and offering is completed our auditing and legal fees will be significantly lower.
On December 31, 2009, the Company had $618,598 in total liabilities. Current liabilities included $62,067 in accounts payable, $85,675 in accrued interest, $2,292 in accrued expenses and $468,564 in current note payable liabilities. Current note payable liabilities include $65,000 in notes payable and $403,564 in notes payable to related parties.
By comparison on December 31, 2008, the Company had $668,046 in total liabilities. On December 31, 2008 liabilities included $76,690 in accounts payable, $84,198 in accrued interest, $3,595 in accrued expenses and $353,563 in current note payable liabilities. Current note payable included $105,000 in notes payable and $248,563 in notes payable to a related party. Total liabilities included long-term liabilities of $150,000 notes payable to related parties.
During the twelve month period ending December 31, 2009, in an effort to secure additional operating capital and to pay down accounts payable and notes payable, the Company borrowed $30,000 represented by four promissory note agreements, $20,000, $2,000, $3,000 and $5,000 from major stockholders of the Company. Each Note, together with interest accrued thereon at the rate of ten percent (10%) per annum, shall become due and payable in one lump sum on March 27, 2010, September 22, 2010, October 7, 2010, and November 18, 2010 respectively. The Notes were issued pursuant to an exemption from registration under Regulation S of the Securities Act of 1933, as amended.
Except as otherwise disclosed herein as of December 31, 2009, the Company had no capital commitments. We are currently focused on developing revenues from our insurance agency operations and our prescription services operations and reducing debt through converting notes payable to common stock when our common stock price provides a reasonable conversion ratio. We may also seek funding from unencumbered securities purchases or from lenders offering favorable terms. At this time, we have no contracts, agreements, or understandings for additional funding, nor can any assurance be given that we will be able to obtain this capital on acceptable terms, if at all. In such an event, this may have a materially adverse effect on our business, operating results and financial condition. If the need arises, we may offer a private placement or attempt to obtain funding through the use of various types of short term funding, loans or working capital financing arrangements from financial institutions and or shareholders. No assurance can be given that we will be able to obtain the total capital necessary to fund our new business plans. In such an event, this may have a materially adverse effect on our business, operating results and financial condition.
Our prime focus is to offer preferred shares to bring in funding to develop the company and move our business plans forward. We continue to stress the importance of the completion of our Form S-1 registration statement and the successful completion of the offering once approved.
At the time of this Offering, we had insufficient cash reserves and receivables necessary to meet forecast operating requirements. In the event we are unsuccessful in our efforts to raise additional funds, we will be required to significantly reduce cash outflows and, possibly, discontinue our operations. We need to raise immediate capital to continue our operations and implement our plans to respond to competitive pressures or otherwise to respond to unanticipated requirements. Our failure to obtain immediate financing or inability to obtain financing on acceptable terms could require us to limit our plans, incur indebtedness that has high rates of interest or substantial restrictive covenants, issue equity securities that will dilute your holdings or discontinue all or a portion of our remaining operations.
The current expansion of the Company’s business demands that significant financial resources be raised to fund capital expenditures, working capital needs, debt service and the cash flow deficits expected to be generated over then next six months by operating losses. Current cash balances and the realization of accounts receivable will not be sufficient to fund the Company’s current business plan beyond the next six months. Consequently, the company is pursuing this Offering in the aggregate amount of up to $1,000,000 to fund the Company’s expansion needs.
Management is currently negotiating with existing shareholders and other accredited investors in order to obtain working capital necessary to meet current and future obligations and commitments. Management is confident that these efforts will produce financing to further the growth of the Company. Nevertheless, there can be no assurance that the Company will be able to raise additional capital on satisfactory terms or at all. In the event that the Company is unable to obtain capital on acceptable terms or in sufficient amounts, the impact thereof would have a material adverse impact on the Company’s business, operating results and financial condition as well as its ability to service debt requirements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.