SECURITIES AND EXCHANGE COMMISSION
 
==================================
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
==================================
 
HEALTH REVENUE ASSURANCE HOLDINGS, INC.
(Exact Name of Small Business Issuer in its Charter)
 
Nevada
 
6411
 
99-0363866
(State or other Jurisdiction of
Incorporation)
 
(Primary Standard
Classification Code)
 
(IRS Employer
Identification No.)
 
8551 W. Sunrise Boulevard, Suite 304
Plantation, Florida 33322
Tel. No.: (954) 472-2340
 (Address and Telephone Number of Registrant’s Principal
Executive Offices and Principal Place of Business)
 
Copies of communications to:
 
Gregg E. Jaclin, Esq.
Szaferman Lakind Blumstein & Blader, PC
101 Grovers Mill Road
Second Floor
Lawrenceville, NJ 08648
Tel. No.: (609) 275-0400
 Fax No.: (609) 555-0969
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration Statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
   
  CALCULATION OF REGISTRATION FEE
 
Title of Each Class Of Securities to be Registered
 
Amount to
be
Registered (1)
   
Proposed
Maximum
Aggregate
Offering
Price
per share (2)
   
Proposed
Maximum
Aggregate
Offering
Price
   
Amount of
Registration
fee
 
                                 
Common Stock, $0.001 par value per share
   
5,125,000
   
$
0.25
   
$
1,281,250
   
$
165.03
 
 
(1)       This Registration Statement covers the resale by our selling shareholders of up to 5,125,000 shares of common stock previously issued to such shareholders.
 
(2)       The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o) of the Securities Act on the basis of the closing bid price of the common stock of the registrant as reported on the OTCBB on January 31, 2014.
   
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.  
 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
 


 
 

 
 
EXPLANATORY NOTE
 
This Registration Statement contains one prospectus as set forth below:
 
Resale Prospectus. A prospectus to be used for the resale by selling stockholders of up to 5,125,000 shares of common stock issued in exchange for compensation to consultants for services performed for the company.
 
 
 
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission (“SEC”) is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
 
 
 

 
 
PRELIMINARY PROSPECTUS    
Subject to completion, dated February __, 2014
 
HEALTH REVENUE ASSURANCE HOLDINGS, INC.
 
5,125,000 SHARES OF COMMON STOCK
 
The selling security holders named in this prospectus are offering all of the shares of common stock offered through this prospectus. We will not receive any proceeds from the sale of the common stock covered by this prospectus.

Our common stock is quoted on the Over-The-Counter Bulletin Board (“OTCBB”) under the ticker symbol “HRAA”. The selling security holders have not engaged any underwriter in connection with the sale of their shares of common stock. Common stock being registered in this registration statement may be sold by selling security holders at prevailing market prices or privately negotiated prices or in transactions that are not in the public market. On January 31, 2014, the closing price of our Common Stock was $0.25 per share.
 
We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and are subject to reduced public company reporting requirements.
 
Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our common stock in “Risk Factors” beginning on page 3 of this prospectus.
 
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the SEC is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
HEALTH REVENUE ASSURANCE HOLDINGS, INC.
 
The date of this prospectus is February  __, 2014
 
 
 

 
 
 
 
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Please read this prospectus carefully. It describes our business, our financial condition and results of operations. We have prepared this prospectus so that you will have the information necessary to make an informed investment decision.
 
You should rely only on information contained in this prospectus.  We have not authorized any other person to provide you with different information.  This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted.  The information in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that date.
 
 
 
This summary highlights selected information contained elsewhere in this prospectus.  This summary does not contain all the information that you should consider before investing in the common stock.  You should carefully read the entire prospectus, including “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Financial Statements, before making an investment decision. In this Prospectus, the terms “HRAH,” “Company,” “we,” “us” and “our” refer to Health Revenue Assurance Holdings, Inc.
 
Overview
 
Health Revenue Assurance Holdings, Inc. (the “Company”) is a source of timely, accurate and critical resources, technology and information that supports the performance of revenue integrity in assuring the existence of healthcare organizations. The company and its subsidiaries’ products and services include business intelligence technology solutions, contract coding, billing, coding and compliance audits, education, revenue cycle consulting, physician services and ICD-10 transition services. The Company provides customized solutions to its clients with the highest regard for ethical standards and responsibility.
 
Unless the context otherwise requires, all references in this Report to “we,” “us,” “our,” “HRAH” and the “Company” refer collectively to Health Revenue Assurance Holdings, Inc., a Nevada corporation, and its subsidiaries, including Health Revenue Assurance Associates, Inc. (“HRAA”).

Where You Can Find Us
 
Our principal executive offices are located at 8551 West Sunrise Blvd., Suite 304, Plantation, FL 33322. Our telephone number is (954) 472-2340 and our fax number is (954) 370-0157. Our website is www.healthrevenue.com.

Implications of Being an Emerging Growth Company
 
We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
 
A requirement to have only two years of audited financial statements and only two years of related MD&A;

Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;

Reduced disclosure about the emerging growth company’s executive compensation arrangements; and

No non-binding advisory votes on executive compensation or golden parachute arrangements.
 
We have already taken advantage of these reduced reporting burdens in this prospectus, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
 
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. We have elected to use the extended transition period provided above and therefore our financial statements may not be comparable to companies that comply with public company effective dates.
 
We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
 
For more details regarding this exemption, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.”
 
 
 
Securities Offered
 
5,125,000 shares of common stock of Health Revenue Assurance Holdings, Inc., par value $0.001 per share (the “Common Stock”). This number represents approximately 9.36% of our current outstanding common stock).
     
Common stock outstanding
before the offering:
 
54,752,294
     
Common stock outstanding
after the offering:
 
54,752,294
     
Terms of the Offering
 
Termination of the Offering:
 
The selling security holders will determine when and how they will sell the common stock offered in this prospectus.
 
The offering will conclude upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) such time as all of the common stock becomes eligible for resale without volume limitations pursuant to Rule 144 under the Securities Act, or any other rule of similar effect.
     
OTCBB Trading Symbol:
 
HRAA
     
Use of proceeds:
 
We are not selling any shares of the common stock covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of common stock covered by this prospectus.
     
Risk Factors:
 
The Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” beginning on page 3.
 
 
The information contained in this prospectus, including in the documents incorporated by reference into this prospectus, includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our Company and management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and the expected impact of the offering on the parties’ individual and combined financial performance. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
 
The forward-looking statements contained in this prospectus are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
 
 
 
The shares of our common stock being offered are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the following factors relating to our business and prospects. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, you may lose all or part of your investment.  You should carefully consider the risks described below and the other information in this process before investing in our common stock.

Risks Related to Our Business
 
Going Concern

The Company’s future success is dependent upon its ability to achieve profitable operations and generate cash from operating activities, and upon additional financing, Management believes they can raise the appropriate funds needed to support their business plan and develop an operating company which is cash flow positive. The Company has not been able to generate sufficient cash from operating activities to fund its ongoing operations. There is no guarantee that the Company will be able to generate enough revenue and/or raise capital to support its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Key employees are essential to expanding our business.

Andrea Clark and Robert Rubinowitz are essential to our ability to continue to grow and expand our business. They have established relationships within the industry in which we operate. If they were to leave us, our growth strategy might be hindered, which could materially affect our business and limit our ability to increase revenue.
  
If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.
 
Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We currently do not maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
 
As a public company, we will have significant requirements for financial reporting and internal controls. We will be required to implement, document and test internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.
 
We cannot assure you that we will not, in the future, be able to successfully implement proper internal control over financial reporting. We cannot assure you that the measures we will take to implement in any area of financial reporting in need of internal controls will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.
 
 
In order to improve our internal controls and procedures in the area of SEC, generally accepted accounting principles (GAAP) and tax accounting procedures, we realize the importance therefore; we began to take steps to address these matters.  As of the date of this registration statement, we have hired an internal control specialist to assist in the design, implementation, and test of adequate controls. We have made pivotal progress to mitigate internal control weaknesses; however, we must still complete the process of design-specific control procedures and test their effectiveness, and maintaining sufficient personnel to implement these tasks before we can report that this weakness has been fully remediated.
 
Lack of experience as officers of publicly-traded companies of our management team may hinder our ability to comply with Sarbanes-Oxley Act.

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff or consultants in order to develop and implement appropriate internal controls and reporting procedures.
 
We compete with many other companies in the market for contract coding and revenue consulting services which may result in lower prices for our services, reduced operating margins and an inability to maintain or increase our market share.

We compete with other companies in a highly fragmented market that includes national, regional and local service providers, as well as service providers with global operations. These companies have services that are similar to ours, and certain of these companies have substantially greater financial resources than we do. There can be no assurance that we will be able to compete effectively against our competitors or timely implement new products and services. Many of our competitors attempt to differentiate themselves by offering lower priced alternatives to our outsourced medical transcription services and customers could elect to utilize less comprehensive solutions than the ones we offer due to the lower costs of those competitive products. Some competition may even be willing to accept less profitable business in order to grow revenue. Increased competition and cost pressures affecting the healthcare markets in general may result in lower prices for our services, reduced operating margins and the inability to maintain or increase our market share.

Our growth is dependent on the willingness of new customers to outsource their coding work to us.

We plan to grow, in part, by capitalizing on perceived market opportunities to provide our services to new customers. These new customers must be willing to outsource functions which may otherwise have been performed within their organizations. Many customers may prefer to remain with their current provider or keep their coding in-house rather than outsource such services to us. Also, as the maintenance of accurate medical records is a critical element of a healthcare provider’s ability to deliver quality care to its patients and to receive proper and timely reimbursement for the services it renders, potential customers may be reluctant to outsource or change providers of such an important function.

Technology innovations in the markets that we serve may create alternatives to our products and result in reduced sales.

Technology innovations to which our current and potential customers might have access could reduce or eliminate their need for our services. A new or other disruptive technology that reduces or eliminates the use of one or more of our services could negatively impact the need for our services. Our failure to develop, introduce or enhance our services able to compete with new technologies in a timely manner could have an adverse effect on our business, results of operation and financial condition.
 
 
Our growth objectives are largely dependent on the timing and market acceptance of our new product offerings, including our ability to continually renew our pipeline of new products and to bring those products to market.
 
Our ability to continually renew our pipeline of new products and bring those products to market may be adversely affected by difficulties or delays in product development, such as the inability to identify viable new products, obtain adequate intellectual property protection, or gain market acceptance of new products. There are no guarantees that new products will prove to be commercially successful.
 
The Department of Health and Human Services has announced a delay in initiating the implementation of the ICD-10 system.
 
In January 2009, the United States Department of Health and Human Services (“HHS”) published a final rule which mandated a change in medical coding in United States health care settings from the current system, International Classification of Diseases, 9th Edition, Clinical Modification (ICD-9-CM), to the International Classification of Diseases, 10th Edition, Clinical Modification/Procedure Coding System (ICD-10-CM/PCS). Compliance with this ruling was to be achieved by October 1, 2013. The new, mandated version expands the number of codes from 24,000 to 155,000, making it more precise and descriptive and more accurately describing the diagnoses and inpatient procedures of care delivered. The transition to ICD-10-CM/PS will require significant business and systems changes throughout the health care industry and will impact all processes and people from finance to compliance to doctors.
 
On April 9, 2012, as published in the Federal Register, citing concerns about the ability of provider groups to meet the looming compliance deadline to adopt ICD-10-CM/PCS, HHS announced a proposed rule which would delay the implementation date to October 1, 2014. Interested parties had the ability to comment during a period ending 30 days after the date of the announcement. On August 27, 2012, Health and Human Services Secretary Kathleen Sebelius announced the release of a rule that makes final a one-year proposed delay—from October 1, 2013, to October 1, 2014 — in the compliance date for the industry's transition to ICD-10 codes.
 
Risks Related to Our Securities
 
The market price of our common stock may be volatile.
 
The market price of our common stock has been and will likely continue to be highly volatile, as is the stock market in general, and the market for OTC Bulletin Board quoted stocks in particular. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.
 
Because we were engaged in a reverse merger, it may not be able to attract the attention of major brokerage firms.
 
Additional risks may exist since we were engaged in a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of the Company since there is little incentive to brokerage firms to recommend the purchase of the common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of the Company in the future.
 
Our common stock will be considered a “penny stock” which may be subject to restrictions on marketability, so you may not be able to sell your shares.
 
If our common stock becomes tradable in the secondary market, we will be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.
 
 
Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
 
The market for penny stocks has experienced numerous frauds and abuses which could adversely impact investors in our stock.
 
OTCBB securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because OTCBB reporting requirements are less stringent than those of the stock exchanges or NASDAQ.

Patterns of fraud and abuse include:
 
Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
 
Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
 
“Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
 
Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
 
Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
 
Our management is aware of the abuses that have occurred historically in the penny stock market.
 
We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.
 
We have never paid any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future and any return on investment may be limited to the value of our common stock. We plan to retain any future earning to finance growth.
 
We are an “Emerging Growth Company,” and any decision on our part to comply only with curtained reduced disclosure requirements applicable to “Emerging Growth Company” could make our common stock less attractive to investors.
 
We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
 
 
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to opt in to the extended transition period for complying with the revised accounting standards.
 
Because we have elected to defer compliance with new or revised accounting standards, our financial statement disclosure may not be comparable to similar companies.
 
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of our election, our financial statements may not be comparable to companies that comply with public company effective dates.
 
Our status as an “Emerging Growth Company” under the JOBS Act of 2012 may make it more difficult to raise capital as and when we need it.
 
Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
 
 
We will not receive any proceeds from the sale of common stock by the selling security holders. All of the net proceeds from the resale of our common stock will go to the selling security holders as described below in the sections entitled “Selling Security Holders” and “Plan of Distribution.” We have agreed to bear the expenses relating to the registration of the common stock for the selling security holders.

  
The prices at which the shares or common stock covered by this prospectus may actually be sold will be determined by the prevailing public market price for shares of common stock, by negotiations between the selling security holders and buyers of our common stock in private transactions or as otherwise described in “Plan of Distribution.”
 
 
The common stock to be sold by the selling shareholders is common stock that is currently issued and outstanding. Accordingly, there will be no dilution to our existing shareholders. 
 
 
 
The common shares being offered for resale by the selling stockholders consist of 5,125,000 shares of common stock consisting of shares issued as compensation to employees and consultants.
 
The following table sets forth the names of the selling stockholders, the number of shares of common stock beneficially owned by each of the selling stockholders as of January 31, 2014 and the number of shares of common stock being offered by the selling stockholders. The shares being offered hereby are being registered to permit public secondary trading, and the selling stockholders may offer all or part of the shares for resale from time to time. However, the selling stockholders are under no obligation to sell all or any portion of such shares nor are the selling stockholders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the selling stockholders.
 
 
  Health Revenue Assurance Associates
Selling Shareholders Share List
 
Name of Selling Stockholder
 
Shares  Beneficially  Owned  Prior to  Offering
 
Shares to be 
Offered
 
Amount 
Beneficially 
Owned 
After 
Offering
   
Percent
Beneficially
Owned
After Offering (1)
 
                     
Brett Borgersen
   
 320,000
 
320,000
   
0
     
0
%
John Paul O'Connor **
   
 1,830,100
 
1,830,000
   
100
     
0
%
Maurizio Corrao **
   
445,000
 
225,000
   
220,000
     
0.40
%
Michael Ciprianni **
   
2,800,000
 
2,550,000
   
250,000
     
0.46
%
Robert Freedman **
   
 1,231,533
 
150,000
   
1,081,533
     
1.97
%
Wald Bloise
   
 70,000
 
50,000
   
20,000
     
0.04
%
Total
   
6,696,633
 
5,125,000
   
1,571,633
     
2.87
%
 
(1)  Based on 54,752,294 shares outstanding as of January 31, 2014.
 
** Based on the combined total of the transfer agent Stock Report dated December 31, 2013 and Non Objective Beneficial Ownership report dated January 6, 2014.
 
These 5,125,000 shares of common stock being registered consist of shares issued as compensation to consultants for services performed for the company.
  
To our knowledge  (with the exception of  Mr. Michael Ciprianni a 5% beneficial owner, that entered into a material definitive consulting agreement as further disclosed in the footnote below) none of the selling stockholders or their beneficial owners:
 
-
has had a material relationship with us other than as a shareholder at any time within the past three years; or
-
has ever been one of our officers or directors or an officer or director of our predecessors or affiliates 
-
are broker-dealers or affiliated with broker-dealers. 
 
Footnote

On September 9, 2013, the Company entered into a one year Material Consulting Agreement with Mr. Michael Ciprianni to provide certain consulting services related to the Company’s business in exchange for four million one hundred twenty five thousand (4,125,000) shares of Common Stock in consideration of the services to be rendered.
 
 
 
This prospectus relates to the resale of up to 5,125,000 shares of common stock issued as compensation to employees and consultants.

Each selling stockholder of our common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions.  These sales may be at fixed or negotiated prices.  A selling stockholder may use any one or more of the following methods when selling shares:
 
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
 
an exchange distribution in accordance with the rules of the applicable exchange;
 
privately negotiated transactions;
 
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
 
in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;
 
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
 
a combination of any such methods of sale; or
 
any other method permitted pursuant to applicable law.
 
The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
 
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
 
In connection with the sale of the common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume.  The selling stockholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
 
The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.  Each selling stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).  

Because selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder.  The selling stockholders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the selling stockholders.
 
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution.  In addition, the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling stockholders or any other person.  We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
 
 
 
Authorized Capital and Preferred Stock
 
Our authorized capital stock consists of 500,000,000 shares of common stock, par value $0.001 per share and 25,000,000 shares of preferred stock, par value $0.001 per share. As of January 31, 2014, there were 54,752,294 shares of common stock and 13,500,000 of Series A 8% Convertible Preferred Stock outstanding.
 
Common Stock
 
The following is a summary of the material rights and restrictions associated with our common stock.
 
The holders of our common stock currently have: (i) equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors of the Company; (ii) are entitled to share ratably in all of the assets of the Company available for distribution to holders of common stock upon liquidation, dissolution or winding up of the affairs of the Company; (iii) do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights applicable thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which stock holders may vote. Please refer to the Company’s Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of the Company’s securities.
 
Preferred Stock
 
On October 17, 2013, the Company amended its articles of incorporation to create a new class of stock by the authorization of 25,000,000 preferred shares of stock. Please refer to the Company’s Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of the Company’s securities.
 
Series A 8% Convertible Preferred Stock
 
On November 12, 2013, the Company filed a certificate of Certificate Of Designation Of Preferences, Rights and Limitations of Series A 8% Convertible Preferred Stock (the “Certificate of Designation”). A total of 13,500,000 shares of Series A Preferred Stock have been authorized for issuance under the Certificate Of Designation. The shares of Series A Preferred Stock have a stated value of $0.40 per share and are initially convertible into 27,000,000 shares of Common Stock at a price of $0.20 per share (subject to adjustment as provided in the Certificate of Designation).
 
Under the Certificate of Designation, the holders of the Series A Preferred Stock have the following rights, preferences and privileges:
 
The Series A Preferred Stock may, at the option of the holder, be converted at any time or from time to time into fully paid and non-assessable shares of Common Stock at the conversion price in effect at the time of conversion;  provided , that a holder of Series A Preferred Stock may at any given time convert only up to that number of shares of Series A Preferred Stock so that, upon conversion, the aggregate beneficial ownership of the Company’s Common Stock (calculated pursuant to Rule 13d-3 of the Securities Exchange Act) of such holder and all persons affiliated with such Purchaser, is not more than 9.985% of the Company’s Common Stock then outstanding. The number of shares into which one share of Series A Preferred Stock shall be convertible is determined by dividing the stated value of $0.40 per share plus the amount of any accrued and unpaid dividends thereon (the “ Stated Value ”), by the initial Conversion Price. The “Conversion Price” per share for the Series A Preferred Stock is initially equal to $0.20 (subject to appropriate adjustment for certain events, including stock splits, stock dividends, combinations, recapitalizations or other recapitalizations affecting the Series A Preferred Stock).
 
Shares of the Series A Preferred Stock shall receive dividends at an annual rate equal to 8% of the Stated Value per share for each of the then outstanding shares of Series A Preferred Stock. In the event of a liquidation, the Series A Preferred Stock is also entitled to a liquidation preference equal to the greater of: (i) the Stated Value in respect of such Series A Preferred Stock and (ii) an amount equal to the amount which the holder of Series A Preferred Stock would be entitled had the Series A Preferred Stock been converted to common stock immediately prior to such liquidation.
 
Except as otherwise required by law, the holders of shares of Series A Preferred Stock shall vote on an as-if-converted-to-Common-Stock basis with the Common Stock and shall not vote separately as a class. However, as long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without the prior written consent of at least sixty-seven percent (67%) of the then outstanding Series A Preferred Stock: (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Certificate of Designation, (b) offer or sell following the date hereof any preferred stock of the Company or any security convertible into or exercisable for preferred stock of the Company, (c) permit any subsidiary of the Company to offer or sell following the date hereof any capital stock of such subsidiary, (d) create, incur, issue, assume, guaranty or suffer to exist, or permit any subsidiary of the Company to create, incur, issue, assume guaranty or suffer to exist, any indebtedness other than trade debt and capital lease obligation incurred in the ordinary course of business, (e) declare or pay dividends on, or make distributions with respect to, any capital stock of the Company, (f) effect a stock split or reverse stock split of the Series A Preferred Stock or any like event, (g) directly or indirectly redeem, purchase or acquire, or make a liquidation payment with respect to, or pay or make available monies for a sinking fund for the redemption of, any Common Stock or other Junior Securities, (h) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (i) increase the number of authorized shares of Series A Preferred Stock, (j) enter into any Fundamental Transaction or (k) enter into any agreement with respect to any of the foregoing.
 
At any time following the forty-eighth (48th) month following the issuance of the Series A Preferred Stock, at the option of the holder, each share of Series A Preferred Stock shall be redeemable for an amount equal to the Stated Value.
 
 
Warrants
 
After September 30, 2013 but prior to the Securities Purchase Agreement (defined below) the Company had issued 2,415,000 Warrants. Of the 2,415,000 warrants, 1,890,000 have an exercise price of $0.30 and no expiration date. The remaining balance of 525,000 warrants were issued with an exercise price of $0.40; they have certain rights that include price protection and may be adjusted from time to time pursuant to the terms and conditions of the warrant agreement, and they have a five year expiration period.
 
On November 12, 2013, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain funds and accounts as to which Great Point Partners, LLC acts as an investment manager, in which the Company issued the following to the purchasers: (i) 13,500,000 shares of Series A Preferred Stock; and (ii) Warrants to purchase an aggregate of 27,000,000 shares of Common Stock for an exercise price of $0.30 per share.
 
Each Warrant entitles the Investor to purchase the number of shares into which such Purchaser’s Series A Preferred Stock is initially convertible. The Warrants are exercisable in whole or in part, at an initial exercise price per share of $0.30 (subject to adjustment) (the “Exercise Price”), and may be exercised in a cashless exercise. The exercise price and number of shares of Common Stock issuable under the Warrants are subject to adjustments for stock dividends, splits, combinations, subsequent rights offerings, pro rata distributions and similar events. Additionally, for the first two years following the issuance of the Warrant, at any time that the Company issues any common stock at a price less than the Exercise Price, the Exercise Price shall then be reduced to that lower issuance price. After the second anniversary of the Warrant, if the Company issues any common stock at a price less than the Exercise Price, the Exercise Price shall then be reduced on a weighted average calculation. Any adjustment to the Exercise Price shall similarly cause the number of warrant shares to be adjusted proportionately so that the total value of the Warrants shall remain the same. In the case of certain fundamental transactions affecting the Company, the holders of the Warrants will have the right to elect a cash payment in exchange for the then outstanding warrants in an amount equal to the Black-Scholes value of those warrants.
 
The number of outstanding warrants as of the date of this prospectus, of which this registration statement is a part, is 29,415,000.
 
Options
 
The Company employees, officers, and directors have outstanding stock options of 1,636,000 to purchase our securities as of January 31, 2014.
 
 
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
 
The financial statements as of December 31, 2012 included in this prospectus and the registration statement have been audited by Salberg & Company, P.A. to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
 
The financial statements as of December 31, 2011 included in this prospectus and the registration statement have been audited by Friedman LLP to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
 
The validity of the issuance of the common stock hereby will be passed upon for us by Szaferman Lakind Blumstein & Blader, PC., Lawrenceville, New Jersey.
 
 
Corporate History
 
The Company is a trusted source of timely, accurate and critical resources, technology and information that supports the performance of revenue integrity in assuring the existence of healthcare organizations. The company and its subsidiaries’ products and services include business intelligence technology solutions, contract coding, billing, coding and compliance audits, education, revenue cycle consulting, physician services and ICD-10 transition services. The Company provides customized solutions to its clients with the highest regard for ethical standards and responsibility.
 
 
Health Revenue Assurance Associates, Inc., a Maryland corporation and subsidiary of the Company (“HRAA”), was incorporated under the laws of the State of Maryland on February 21, 2001 as Healthcare Revenue Assurance Associates, Inc. Effective June 2001, HRAA changed its name to Health Revenue Assurance Associates, Inc.
 
Dream Reachers, LLC (“Dream Reachers”), owns the Company’s offices and is the borrower on a mortgage loan related to such offices. Dream Reachers does not engage in real estate rental business. Its offices are occupied by HRAA at no cost and HRAA pays the related mortgage’s principal and interest, taxes and maintenance. Dream Reachers was previously treated as a VIE, but became a wholly owned subsidiary in May 2011, and has been treated as such for accounting purposes in the Company’s consolidated financial statements.
 
On February 10, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Health Revenue Acquisition Corp., a Nevada corporation and its wholly-owned subsidiary (“Acquisition Sub”), and HRAA, pursuant to which Acquisition Sub was merged with and into HRAA, and HRAA, as the surviving corporation, became a wholly-owned subsidiary of the Company (the “Merger”). Each share of HRAA's common stock was exchanged for the right to receive approximately 1,271 shares of the Company’s common stock. Before their entry into the Merger Agreement, no material relationship existed between the Company or Acquisition Sub and HRAA.
 
Prior to the closing of the Merger, we transferred all of our operating assets and liabilities to Anvex Split Corp., a Nevada corporation (the “Split-Off Subsidiary”), and contemporaneously with the closing of the Merger, we split-off the Split-Off Subsidiary through the sale of all of the outstanding capital stock of the Split-Off Subsidiary (the “Split-Off”) to our former sole officer and director (the “Split-Off Shareholder”). In connection with the Split-Off, an aggregate of 3,500,000 shares of our common stock held by the Split-Off Shareholder were surrendered and cancelled without further consideration.
 
Pursuant to the terms and conditions of the Merger Agreement, and upon the consummation of the Merger:

Each share of HRAA’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 1,271,111 shares of the Company’s common stock.  An aggregate of 1,271,111 shares of the Company’s common stock were issued to the holders of HRAA’s common stock.  Immediately prior to the Merger, HRAA had no outstanding securities other than shares of its common stock. 
 
Anna Vechera resigned as the Company’s sole officer and director, and simultaneously with the Merger, a new board of directors and new officers were appointed. The Company’s new board of directors consisted of Robert Rubinowitz, Andrea Clark and Keith Siddel, previously the directors of HRAA. In addition, immediately following the Merger, Andrea Clark was appointed as the Company’s President and Chief Executive Officer, Robert Rubinowitz was appointed as the Company’s Chief Operating Officer, Secretary and Treasurer and Keith Siddel was appointed as the Company’s Chief Marketing Officer. Keith Siddel no longer holds this position.
 
Prior to the closing of the Merger and the closing on at least the Minimum Offering Amount (as defined below), the Company transferred all of its operating assets and liabilities to Anvex Split Corp., a Nevada corporation and its wholly-owned (the “Split-Off Subsidiary”), and contemporaneously with the closing of the Merger, the Company split-off the Split-Off Subsidiary through the sale of all of the outstanding capital stock of the Split-Off Subsidiary (the “Split-Off”) to its former sole officer and director (the “Split-Off Shareholder”).  In connection with the Split-Off, an aggregate of 3,500,000 shares of the Company’s common stock held by the Split-Off Shareholder were surrendered and cancelled without further consideration
 
On April 13, 2012, the Company’s board of directors (the “Board”) unanimously approved a change in the Company’s name from Anvex International, Inc. to Health Revenue Assurance Holdings, Inc.
 
On April 13, 2012, the Board authorized a 12.98-for-1 split of its common stock to stockholders of record as of April 13, 2012 (the “Stock Split”). The shares resulting from the Stock Split were issued on April 26, 2012. All share and per share amounts for all periods presented have been retroactively adjusted to reflect the Stock Split.
 
 
Private Placement Offering
 
Concurrently with the closing of the Merger and in contemplation of the Merger, we sold 2,676,255 shares of our Common Stock for gross proceeds of $663,908 at a purchase price of $0.25 per share in a private placement offering (the “Offering”). The Offering was being offered with a minimum amount of $470,000 and up to a maximum of $1,500,000.
 
On April 12, 2012, we closed the Offering by selling an additional $349,000 at the purchase price of $0.25 and issuing 1,394,909 shares of Common Stock. The total raised in the Offering was $1,012,908.

The shares of Common Stock issued to the former stockholders of HRAA in connection with the Merger were not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and Regulation D promulgated thereunder, which exempts transactions by an issuer not involving any public offering. These securities may not be offered or sold absent registration or an applicable exemption from the registration requirements. We have not committed to registering these shares for resale. Certificates representing these shares contain a legend stating the restrictions applicable to such shares.
 
Overview
 
HRAA improves the healthcare delivery experience for doctors, nurses and patients while assuring the existence of healthcare organizations. Since 2001, we have been providing Revenue Integrity programs for healthcare organizations across the country and are committed to providing the most intuitive and effective solutions in the industry. HRAA’s products and services include business intelligence technology solutions, contract coding, billing, coding and compliance audits, education, revenue cycle consulting, physician services and ICD-10 transition services. Our collaborative approach provides the right solutions for our clients’ needs with the highest regard for ethical standards and responsibility.
 
We are subject to risks common to service providers and consulting companies, including competition and the ability to recruit, train, and put in place a sufficient quantity of proficient consultants and medical coders familiar with the requirements of IDC-10-CM/PCS, the uncertainty of future regulatory approvals and laws, the need for future capital and the retention of key employees. We cannot provide assurance that we will generate revenues sufficient to sustain profitability in the future.
 
Recent Developments
 
Certain significant items or events must be considered to better understand differences in our results of operations from period to period. We believe that the following items have had a material impact on our results of operations for the periods discussed below or may have a material impact on our results of operations in future periods.
 
ICD-10 Transition
 
In the short term, the main focus of our business will be with respect to the ICD-10 coding transition. In that regard, our potential clients are all hospitals and medical providers which currently maintain coding personnel in some form that are primarily responsible for seeking reimbursement for patients’ procedures. The current system in place that drives the appropriate medical codes from hospitals/medical facilities to insurance companies is called ICD-9, which was implemented over 30 years ago.
 
 
In January 2009, the United States Department of Health and Human Services published a final rule which mandated a change in medical coding in United States health care settings from the current system, International Classification of Diseases, 9th Edition, Clinical Modification (ICD-9-CM), to the International Classification of Diseases, 10th Edition, Clinical Modification/Procedure Coding System (ICD-10-CM/PCS). Compliance with this ruling was to be achieved by October 1, 2013. The new, mandated version expands the number of codes from 24,000 to 155,000, making it more precise and descriptive and more accurately describing the diagnoses and inpatient procedures of care delivered. The transition to ICD-10-CM/PS will require significant business and systems changes throughout the health care industry and will impact all processes and people from finance to compliance to doctors.
 
On April 9, 2012, as published in the Federal Register, citing concerns about the ability of provider groups to meet the looming compliance deadline to adopt ICD-10-CM/PCS, HHS announced a proposed rule which would delay the implementation date to October 1, 2014. Interested parties had the ability to comment during a period ending 30 days after the date of the announcement. On August 27, 2012, Health and Human Services Secretary Kathleen Sebelius announced the release of a rule that makes final a one-year proposed delay—from October 1, 2013, to October 1, 2014 — in the compliance date for the industry's transition to ICD-10 codes.
 
The Company anticipates implementation of ICD-10-CM/PCS to be completed by the newly proposed effective date of October 1, 2014.
 
We believe that we are capable of providing consulting and related services with respect to the ICD-10 coding transition and the potential issues that we believe medical providers will experience due to the transition. In that regard, we believe the following are some of the issues that will be experienced due to the changeover:
 
The new system will require time, money and commitment by over 6,000 hospitals, 600,000 physicians and every health insurance provider in the United States.
 
Re-education and training of every Health Information Management (“HIM”) department is required of every hospital and medical facility in the United States.

All claims submitted by hospitals and physicians for reimbursement without utilizing ICD-10 will result in immediate rejection and non-payment.
 
HRAA’s vision regarding ICD-10 Transition:
 
Hospitals and medical facilities will incur massive backlogs in their billing and coding departments.  Backlog in coding will lead to greater time between payments and crippling financial deficits.

There will likely be an increase in coding errors, resulting in incorrect payments that can lead to hefty fines.
 
Initial estimates based on other countries that have already converted to ICD-10 predict a 50% loss of productivity due to the complexity of the new system - a result of more time being allocated to the preparation of each individual patient case.
 
The sheer number of codes and time for each entry will dramatically impact the workload.  Currently there are not enough coders to meet this demand, resulting in an ongoing shortfall, with an accelerating shortfall anticipated after ICD-10 is implemented.
 
Every discipline in the hospital will be affected as they all revolve around the same coding system.

For each code in the ICD-9 format, there will be additional, more descriptive codes in the ICD-10 format. This will greatly increase the quality of patient care, but simultaneously put a burden on hospitals and their medical coders.
 
Currently under ICD-9, hundreds of millions of dollars of revenue are lost each year due to medical coding and billing errors.

The average age of a medical coder is 54. It is estimated that 20% of coders plan to retire or change activities because of this transition.
 
 
HRAH Chairman, CEO and Founder Andrea Clark, RHIA, CCS, CPC-H, continues to build the Company to meet the changing needs of the healthcare community and her accomplishments continue to be acknowledged. A few recent awards include:
 
“Female Executive of the Year” Gold Award Winner - Stevie Awards for Women in Business – December, 2012 
 
“Maverick of the Year” Bronze Award Winner - Stevie Awards for Women in Business – December, 2012

“Mentor of the Year" - 2012 AHIMA Triumph Awards – June, 2012 
 
“10 HIM Heroes, Professionals Who Have Made a Difference" - For The Record Magazine – October, 2011
 
“Broward County Ultimate CEO Award” – October, 2013
 
HRAA has also been recognized for tremendous growth and industry leadership. Recent acknowledgments include:
 
“Fastest Growing Company of the Year” Bronze Award Winner- Stevie Awards for Women in Business – December, 2012

“Top Ten Best Places To Work” - South Florida Business Journal – 2011
 
We believe we are able to provide hospitals and medical providers with the ability to effectively transition to ICD-10 and prevent massive backlogs that lead to crippling financial deficits. Our team of certified coders provides hospitals with the expertise needed to successfully input the proper data set into the Health Information Management (HIM) system which drives reimbursement from insurance providers such as Medicare and Medicaid, as well as private insurance companies. We offer above industry standards ICD-9 and ICD-10 training to coders, equipping them with the knowledge to effectively assign the appropriate codes. We also conduct medical billing audits, identifying risks of lost revenue and ensuring the correct amounts have been paid. In doing so, we shorten the revenue cycle and prevent financial stress on healthcare providers.
 
 
The transition from ICD-9 to ICD-10 is and will drastically affect the entire healthcare industry, especially patients, hospitals, medical facilities, physicians, insurance providers and the coding workforce. Our goal is to optimize revenue integrity by providing expert contract coding and consulting services to hospitals and medical facilities throughout the United States. We will implement marketing tools in order to create our own brand identity and leverage this rapidly growing awareness of the upcoming switch to ICD-10 and the potential financial pressure a hospital will face if not properly prepared and trained.
 
We believe that the following tasks are essential to achieve ongoing success:
 
development of long lasting relationships with new clients and strengthen relationships with existing clients;
recruitment and proper training of qualified personnel;
appropriate fiscal planning and execution;
development of an extensive sales network;
effective and broad-reaching promotional programs;
connecting effectively with executive-level decision makers of hospitals and medical facilities;
accurately and efficiently audit the medical billing records to maximize revenue integrity;
ensure that we are supplying hospitals and medical facilities with top quality, certified medical coders;
developing and deploying dynamic and effective marketing strategies; and
informing healthcare professionals of the products, services and benefits of being an HRAA client.
 
In addition to the above, our ICD-10 coding transition services will also include the training of our client’s staff with respect to the ICD-10 coding system; providing coding resources while the client’s staff is undergoing training; coding resources to handle backlog as productivity levels drop off; and auditing resources to ensure retention and accuracy of the ICD-10 coding.
 
Products and Services
 
We provide our customers with customized, hands-on, strategy-focused and in-depth analysis of a hospital’s Revenue Cycle and their compliance, as well as APC and DRG coding and documentation audits. We also offer customized education and certification programs, charge master data integrity, reviews, and solutions yielding measurable results, increased productivity, reduced DNFB, improved APC accuracy and optimized Revenue Integrity. We are committed to providing the most intuitive Revenue Integrity solutions in the industry through various means including APC AuditPro™, our proprietary internal auditing technology for outpatient claims.
 
HRAA provides an in-depth analysis of a hospital’s revenue cycle and their compliance, and offers the only full suite of business intelligence products and consulting services required to keep up with the ever-changing healthcare industry. All of our products and services yield measurable results, increased productivity, reduced unbilled accounts, improved payment accuracy and provide optimized revenue integrity for hospitals and physicians.
 
Products
 
Healthcare is traversing a period of significant change with the dawning of Accountable Care Organizations (“ACOs”), the declaration of Meaningful Use, and probably the most important of these agents of change is the transition from ICD-9 to ICD-10. To understand the importance of these changes, healthcare’s decision makers need to recognize the impact these changes are having on their organizations. To do this they must visualize and analyze their available data to produce actionable results that improve the organization’s overall performance.
 
ICD-10 Education Curriculum
 
We provide our customers with an online internally developed education curriculum focused on ICD-10 CM Diagnosis and ICD-10-PCS Procedure course material.
 
Visualizer
 
Visualizer ™ is an analytic platform that provides healthcare decision makers with an integrated view of financial, operational, and clinical data across multiple sources of data. Each   Visualizer   ™ building block is designed to meet a specific analytic need.
 
OMC Initiator
 
The Outsourced Medical Coding Initiator was created for processing healthcare claims within hospitals. This product captures data from the physician or the hospital’s financial systems and correlates the data in a manner that expedites the processing of a claim. To validate our new product, our team of Emergency Department Coders (ED Coders) is continuously evaluating the process of coding claims in order to enhance our product.
 
 
Verifier™ (Inpatient and Outpatient)
 
Healthcare organizations need executable tactics that can be implemented up and down the revenue cycle, with both inpatients and outpatients. These steps taken must be clear and simple to really improve the patient experience. Creating a successful revenue integrity program will have the most immediate impact in that initiative. However, there is a significant challenge in today’s environment of complex regulations, changing payer requirements, and RAC, CERT, HIPAA along with ICD-10 pressures and increasing financial and workforce resource constraints.
 
Under the Center for Medicare and Medicaid Services’ (“CMS’”) value-based purchasing rules, hospitals will be assessed on quality performance, with clinical measures weighted at 70% and patient experience measures weighted at 30%. Verifier™ Suite is the most comprehensive solution for healthcare organizations performing internal auditing that provides insight into both clinical quality and service quality. This proven technology has been stress tested by HRAA providing internal auditing services to our clients for over 10 years. Although, conducting regular audits and taking a high level view of the reimbursement landscape is required, it’s not until you roll up your sleeves and start digging into the claim details, that you will uncover hidden revenue integrity issues.
 
Services
 
Coding Services
 
The HRAA coding solution provides hospitals and physicians across the United States with an experienced team of backlog coders to assist facility coding departments or provide outsourcing services. Certified HRAA associates supply hospitals and physicians with medical coding and billing expertise, while reducing the risk of error and maximizing accuracy, efficiency and profitability. Medical coding is the process of taking information from a wide variety of patient medical records, charts and notes, and converting it into an alphanumeric data set. The data set then drives the payment for the services rendered when submitted to Medicare, Medicaid, commercial payers and other healthcare providers. Medical coders analyze the documentation maintained within medical records and assign codes that drive reimbursement. Additionally, the data set is utilized as a collection methodology for tracking diseases, quality of care and treatment.
 
Billing & Coding Audits
 
HRAA’s team motivates excellence and reimbursement proficiency through customized, hands-on, strategy-focused and in-depth approach to the issues facing hospitals today and preparing them for tomorrow. While increasing profits for healthcare professionals remains a moving target, it is paramount to focus attention on compliant reimbursement dollars.
 
Education
 
We offer various training and educational opportunities to our clients, including Education Sessions, Coding Boot Camps, Workshops, and Webinars.
 
Consulting
 
We have specialized in building reimbursement proficiency by focusing on the entire revenue cycle, not just coding, and by providing RAC oriented audits, education and consulting services. Because our approach is to focus on the client’s needs and develop the solution on an individual basis, our team possesses extensive experience in revenue cycle issues. We focus not merely on the revenue and codes, but on their operational uses. HRAA’s consulting services provide secure and effective solutions for complex regulatory challenges, internal inefficiencies and revenue cycle analysis.
 
ICD-10 Transition Services
 
The transition to ICD-10 codes is not just a coding conversion; it is a change that impacts virtually all areas of the revenue cycle. HRAA’s unique approach to this business transition is multidimensional, providing organizations with a smooth and sustainable transition. HRAA offers “turn-key ICD-10 services” to assist clients with all aspects of the transition, with great emphasis on streamlined comprehensive training while maintaining productivity.
 
HRAA's ICD-10 Transition Services Include ICD Visualizer ™, Needs Assessment, ICD-9/ICD-10 Dual Audit, Education, Reserved Medical Coder Personnel, Auditing, Continuous Support.
 
Business Intelligence
 
HRAA offers Business Intelligence Services to help clients interpret data and make healthcare organizations more efficient and effective.
 
HRAA Business Intelligence team offers a number of solutions including: Implementation of Visualizer™ Suite products, Deployment of solution templates, Development of custom applications. HRAA solution template offers the flexibility to customize the solution to meet client's needs without having to start application development from scratch.
 
HRAA's implementation experience of templates include: Surgery Center Analytics, Revenue Cycle Management, Customer satisfaction surveys, Hospital Statistics, Quality measures.
 
 
Physician Services
 
Certified coders and auditors are fully trained and are required to maintain continuing education each year to uphold their certification. HRAA is proactive providing each coder and auditor with many opportunities for additional training to make certain we are always providing the highest quality standard you expect from HRAA. HRAA takes each encounter through a rigorous review in-line with the documentation guidelines used by CMS.
 
The education that follows an audit includes the basic fundamentals of appropriate documentation for the levels of service billed. Physician will be introduced to the specific issues noted within the documented service. Recommendations on how to improve upon the documentation will be discussed, including template usage, appropriate EHR revisions, form creation, and so forth.
 
Marketing
 
We will utilize the following sales and marketing methods to reach our target markets:
 
Direct Sales – In addition to our management building sales nationwide, we plan on hiring additional sales people who will target direct institutional healthcare facilities according to geographic area.
 
Local, Federal and State Industry Associations – We plan on actively developing relationships with the hundreds of medical associations throughout the United States.
 
Trade Shows and Conferences – We plan on highlighting our products and services at trade shows and industry conferences across the United States, which provide access to key healthcare decision makers and client leads.
 
Internet Marketing & E-commerce Strategy – We plan to utilize web-based tools and Internet marketing methods to increase the brand name by search engine optimization, mining and partner links.
 
Public Relations and Branding – Our reputation has been well established in the industry as a result of the success of our founder, Andrea Clark. We plan on expanding our presence in the public vision and in the healthcare industry by working hand in hand with a top public relations firm.
 
Subsidiaries
 
Following the Merger, HRAA became our wholly-owned subsidiary.
 
Dream Reachers, LLC, owns the Company’s offices and is the borrower on a mortgage loan related to such offices. Dream Reachers does not engage in real estate rental business. Its offices are occupied by HRAA at no cost and HRAA pays the related mortgage’s principal and interest, taxes and maintenance. Dream Reachers was previously treated as a VIE, but became a wholly owned subsidiary in May 2011, and has been treated as such for accounting purposes in the Company’s consolidated financial statements.
 
 
Competition
 
Our competition includes companies such as Advance Computer Software Group PLC, Nexus AG, Mediware Info, SHL Telemedicine Ltd., Pro Medicus Ltd., Noemalife SpA, MedAssets, Medical Columbus AG, Clinical Computing PLC, and Medquist Inc. However, while we exclusively dedicate our operations to providing coding and billing audits, consulting services, medical backlog coding and staffing, and ICD-10 educational and training services to hospitals and healthcare facilities, none of our competitors provide the full spectrum of these services, specifically backlog coding and staffing.
 
Regulatory Matters/Compliance
 
We are not aware of any need for any government approval of our principal products or services. We do not anticipate any governmental regulations on our business.
 
Intellectual Property
 
We have a patent pending on our computer software and technology relating to hospital claims auditing system and methods. We filed for this patent on October 13, 2006.
 
Employees
 
As of January 31, 2014, we had one hundred and seven (107) full-time and part-time employees. None of these employees are represented by collective bargaining agreements and the Company considers it relations with its employees to be good.
 
Corporation Information
 
Our principal executive offices are located at 8551 West Sunrise Blvd., Suite 304, Plantation, FL 33322. Our telephone number is (954) 472-2340 and our fax number is (954) 370-0157. Our website is www.healthrevenue.com.
 
Other Information
 
News and information about Health Revenue Assurance Holdings, Inc. and our wholly owned subsidiaries is available on and/or may be accessed through our website, www.healthrevenue.com. In addition to news and other information about our company, we have provided access through this site to our filings with the Securities and Exchange Commission as soon as reasonably practicable after we file or furnish them electronically. Information on our website does not constitute part of and is not incorporated by reference into this Annual Report on Form 10-K or any other report we file or furnish with the SEC. You may also read and copy any document that we file at the public reference facilities of the SEC in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC’s website at http://www.sec.gov.
 
 
The Company’s corporate headquarters is located in Plantation, Florida. The Company currently leases space located at 8551 W. Sunrise Boulevard, Unit 305, Plantation, Florida 33322. The lease is for a term of one-year beginning on September 1, 2012 and ending August 31, 2013. We have elected to renew our current lease starting September 1, 2013 for an additional one-year term. As of September 1, 2013, our monthly lease payments are approximately $5,500 for a total of approximately $66,000 for the total term of the lease.
 
Dream Reachers, LLC, also owns property located at 8551 W. Sunrise Boulevard, Unit 304, Plantation, Florida 33322. This condominium is located adjacent to our corporate headquarters and we use it for employees and training. There was an original mortgage on the property in the amount of $192,500.
 
 
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
 
 
 
Price Range of Common Stock
 
Our common stock is quoted on the OTCBB since July 2012 under the symbol “HRAA.” The OTCBB is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter equity securities. An OTCBB equity security generally is any equity that is not listed or traded on a national securities exchange. The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTCBB quotation service. These bid prices represent prices quoted by broker-dealers on the OTCBB quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.
 
   
Fiscal 2012-2014
 
   
High
   
Low
 
             
Third Quarter (July 1 - September 30) 2012
 
$
0.29
   
$
0.29
 
Fourth Quarter (October 1 - December 31) 2012
 
$
0.35
   
$
0.10
 
First Quarter (January 1 - March 31) 2013
 
$
0.52
   
$
0.25
 
Second Quarter (April 1 - June 30) 2013
 
$
0.62
   
$
0.25
 
Third Quarter (July 1 - September 30) 2013
 
$
0.52
   
$
0.20
 
Fourth Quarter (October 1 - December 31) 2013
 
$
0.30
   
$
0.11
 
First Quarter (January 1 – February 10) 2014
 
$
0.29
 
 
$
0.20
 
 
 
As of January 31, 2014 we had approximately 400 record holders of our common stock, holding 54,752,294 shares of common stock.
 
Holders of our common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of common stock do not have cumulative voting rights.
 
Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued and outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation.
 
Although there are no provisions in our charter or by-laws that may delay, defer or prevent a change in control, we are authorized, without shareholder approval, to issue shares of preferred stock that may contain rights or restrictions that could have this effect.
 
Holders of common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
 
 
We have never declared or paid dividends on our common stock. We do not intend to declare dividends in the foreseeable future because we anticipate that we will reinvest any future earnings into the development and growth of our business. Any decision as to the future payment of dividends will depend on our results of operations and financial position and such other factors as our Board of Directors in its discretion deems relevant.
 
 
The transfer agent for our common stock is Vstock Transfer, LLC at 77 Spruce Street, Suite 201, Cedarhurst, NY 11516, and its telephone number is (212) 828-8436.
 
 
 
The following discussion and analysis of the results of operations and financial condition of Health Revenue Assurance Holdings, Inc. for the fiscal years ended December 31, 2012 and 2011 and for the three and nine months ended September 30, 2013 and 2012, should be read in conjunction with the Selected Consolidated Financial Data, Health Revenue Assurance Holdings’ financial statements, and the notes to those financial statements that are included elsewhere in this filing. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Cautionary Notice Regarding Forward-Looking Statements in this filing. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “on going,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
 
Overview
 
On February 10, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization with Health Revenue Acquisition Corp., a Maryland corporation and our wholly-owned subsidiary, and Health Revenue Assurance Associates, Inc., a Maryland corporation, pursuant to which Acquisition Sub was merged with and into HRAA, and HRAA, as the surviving corporation, became our wholly-owned subsidiary.
 
HRAA improves the healthcare delivery experience for doctors, nurses and patients while assuring the existence of healthcare organizations.  Since 2001, we have been providing Revenue Integrity programs for healthcare organizations across the country and are committed to providing the most intuitive and effective solutions in the industry. HRAA’s products and services include business intelligence technology solutions, contract coding, billing, coding and compliance audits, education, revenue cycle consulting, physician services and ICD-10 transition services.  Our collaborative approach provides the right solutions for our clients’ needs with the highest regard for ethical standards and responsibility.
 
On April 13, 2012, the Board unanimously approved a change in the Company’s name from Anvex International, Inc. to Health Revenue Assurance Holdings, Inc. to be consistent with our current business following the Merger.
 
We are subject to risks common to service providers and consulting companies, including competition and the ability to recruit, train, and put in place a sufficient quantity of proficient consultants and medical coders familiar with the requirements of IDC-10-CM/PCS, the uncertainty of future regulatory approvals and laws, the need for future capital and the retention of key employees. We cannot provide assurance that we will generate revenues or achieve and sustain profitability in the future.

Recent Developments

Certain significant items or events must be considered to better understand differences in our results of operations from period to period. We believe that the following items have had a material impact on our results of operations for the periods discussed below or may have a material impact on our results of operations in future periods.

ICD-10 Transition

In the short term, the main focus of our business will be with respect to the ICD-10 coding transition. In that regard, our potential clients are all hospitals and medical providers which currently maintain coding personnel in some form that are primarily responsible for seeking reimbursement for patients’ procedures. The current system in place that drives the appropriate medical codes from hospitals/medical facilities to insurance companies is called ICD-9, which was implemented over 30 years ago.
 
In January 2009, the United States Department of Health and Human Services published a final rule which mandated a change in medical coding in United States health care settings from the current system, International Classification of Diseases, 9th Edition, Clinical Modification (ICD-9-CM), to the International Classification of Diseases, 10th Edition, Clinical Modification/Procedure Coding System (ICD-10-CM/PCS). Compliance with this ruling was to be achieved by October 1, 2013.  The new, mandated version expands the number of codes from 24,000 to 155,000, making it more precise and descriptive and more accurately describing the diagnoses and inpatient procedures of care delivered.  The transition to ICD-10-CM/PS will require significant business and systems changes throughout the health care industry and will impact all processes and people from finance to compliance to doctors. 
 
On April 9, 2012, as published in the Federal Register, citing concerns about the ability of provider groups to meet the looming compliance deadline to adopt ICD-10-CM/PCS, HHS announced a proposed rule which would delay the implementation date to October 1, 2014.  Interested parties had the ability to comment during a period ending 30 days after the date of the announcement. On August 27, 2012, HHS Secretary Kathleen Sebelius announced the release of a rule that makes final a one-year proposed delay—from October 1, 2013, to October 1, 2014 — in the compliance date for the industry's transition to ICD-10 codes.
 
 
The Company anticipates implementation of ICD-10-CM/PCS to be completed by the newly proposed effective date of October 1, 2014.
 
We believe that we are capable of providing consulting and related services with respect to the ICD-10 coding transition and the potential issues that we believe medical providers will experience due to the transition. In that regard, we believe the following are some of the issues that will be experienced due to the changeover:

The new system will require time, money and commitment by over 6,000 hospitals, 600,000 physicians and every health insurance provider in the United States.
 
Re-education and training of every Health Information Management (“HIM”) department is required of every hospital and medical facility in the United States.
 
All claims submitted by hospitals and physicians for reimbursement without utilizing ICD-10 will result in immediate rejection and non-payment.
 
HRAA’s vision regarding ICD-10 Transition:
 
Hospitals and medical facilities will incur massive backlogs in their billing and coding departments.  Backlog in coding will lead to greater time between payments and crippling financial deficits.
 
There will likely be an increase in coding errors, resulting in incorrect payments that can lead to hefty fines.
 
Initial estimates based on other countries that have already converted to ICD-10 predict a 50% loss of productivity due to the complexity of the new system - a result of more time being allocated to the preparation of each individual patient case.
 
The sheer number of codes and time for each entry will dramatically impact the workload.  Currently there are not enough coders to meet this demand, resulting in an on-going shortfall, with an accelerating shortfall anticipated after ICD-10 is implemented.
 
Every discipline in the hospital will be affected as they all revolve around the same coding system.
 
For each code in the ICD-9 format, there will be additional, more descriptive codes in the ICD-10 format. This will greatly increase the quality of patient care, but simultaneously put a burden on hospitals and their medical coders.
   
Currently under ICD-9, hundreds of millions of dollars of revenue are lost each year due to medical coding and billing errors.
 
The average age of a medical coder is 54. It is estimated that 20% of coders plan to retire or change activities because of this transition.
 
HRAH Chairman, CEO and Founder Andrea Clark, RHIA, CCS, CPC-H, continues to build the Company to meet the changing needs of the healthcare community and her accomplishments continue to be acknowledged. A few recent awards include:
 
“Female Executive of the Year” Gold Award Winner - Stevie Awards for Women in Business – December, 2012
 
"Maverick of the Year” Bronze Award Winner - Stevie Awards for Women in Business – December, 2012
 
“Mentor of the Year" - 2012 AHIMA Triumph Awards – June, 2012
 
“10 HIM Heroes, Professionals Who Have Made a Difference" - For The Record Magazine – October, 2011
 
“Broward County Ultimate CEO Award” – October, 2013
 
HRAA has also been recognized for tremendous growth and industry leadership. Recent acknowledgments include:
 
“Fastest Growing Company of the Year”  Bronze Award Winner- Stevie Awards for Women in Business – December, 2012
 
“Top Ten Best Places To Work” - South Florida Business Journal – 2011  

We believe we are able to provide hospitals and medical providers with the ability to effectively transition to ICD-10 and prevent massive backlogs that lead to crippling financial deficits.  Our team of certified coders provides hospitals with the expertise needed to successfully input the proper data set into the Health Information Management (HIM) system which drives reimbursement from insurance providers such as Medicare and Medicaid, as well as private insurance companies.  We offer above industry standards ICD-9 and ICD-10 training to coders, equipping them with the knowledge to effectively assign the appropriate codes. We also conduct medical billing audits, identifying risks of lost revenue and ensuring the correct amounts have been paid. In doing so, we shorten the revenue cycle and prevent financial stress on healthcare providers.
 
The transition from ICD-9 to ICD-10 is and will drastically affect the entire healthcare industry, especially patients, hospitals, medical facilities, physicians, insurance providers and the coding workforce. Our goal is to optimize revenue integrity by providing expert contract coding and consulting services to hospitals and medical facilities throughout the United States.  We will implement marketing tools in order to create our own brand identity and leverage this rapidly growing awareness of the upcoming switch to ICD-10 and the potential financial pressure a hospital will face if not properly prepared and trained.
 
 
We believe that the following tasks are essential to achieve on-going success:
 
development of long lasting relationships with new clients and strengthen relationships with existing clients;
 
recruitment and proper training of qualified personnel;
 
appropriate fiscal planning and execution;
 
development of an extensive sales network;
 
effective and broad-reaching promotional programs;
 
connecting effectively with executive-level decision makers of hospitals and medical facilities;
 
accurately and efficiently audit the medical billing records to maximize revenue integrity;
 
ensure that we are supplying hospitals and medical facilities with top quality, certified medical coders;
 
developing and deploying dynamic and effective marketing strategies; and
 
informing healthcare professionals of the products, services and benefits of being an HRAA client.

In addition to the above, our ICD-10 coding transition services will also include the training of our client’s staff with respect to the ICD-10 coding system; providing coding resources while the client’s staff is undergoing training; coding resources to handle backlog as productivity levels drop off; and auditing resources to ensure retention and accuracy of the ICD-10 coding.

Products and Services

We provide our customers with customized, hands-on, strategy-focused and in-depth analysis of a hospital’s Revenue Cycle and their compliance, as well as APC and DRG coding and documentation audits. We also offer customized education and certification programs, charge master data integrity, reviews, and solutions yielding measurable results, increased productivity, reduced DNFB, improved APC accuracy and optimized Revenue Integrity. We are committed to providing the most intuitive Revenue Integrity solutions in the industry through various means including APC AuditPro™, our proprietary internal auditing technology for outpatient claims.
 
HRAA provides an in-depth analysis of a hospital’s revenue cycle and their compliance, and offers the only full suite of business intelligence products and consulting services required to keep up with the ever-changing healthcare industry. All of our products and services yield measurable results, increased productivity, reduced unbilled accounts, improved payment accuracy and provide optimized revenue integrity for hospitals and physicians.
 
Products
 
Healthcare is traversing a period of significant change with the dawning of ACOs, the declaration of Meaningful Use, and probably the most important of these agents of change is the transition from ICD-9 to ICD-10. To understand the importance of these changes, healthcare’s decision makers need to recognize the impact these changes are having on their organizations. To do this they must visualize and analyze their available data to produce actionable results that improve the organization’s overall performance.
 
ICD-10 Education Curriculum

We provide our customers with an online internally developed education curriculum focused on ICD-10 CM Diagnosis and ICD-10-PCS Procedure course material.

Visualizer

Visualizer ™ is an analytic platform that provides healthcare decision makers with an integrated view of financial, operational, and clinical data across multiple sources of data. Each   Visualizer ™   building block is designed to meet a specific analytic need.
 
OMC Initiator
 
The Outsourced Medical Coding Initiator was created for processing healthcare claims within hospitals. This product captures data from the physician or the hospital’s financial systems and correlates the data in a manner that expedites the processing of a claim. To validate our new product, our team of Emergency Department Coders (ED Coders) is continuously evaluating the process of coding claims in order to enhance our product.
 
Verifier™ (Inpatient and Outpatient)
 
Healthcare organizations need executable tactics that can be implemented up and down the revenue cycle, with both inpatients and outpatients. These steps taken must be clear and simple to really improve the patient experience. Creating a successful revenue integrity program will have the most immediate impact in that initiative. However, there is a significant challenge in today’s environment of complex regulations, changing payer requirements, and RAC, CERT, HIPAA along with ICD-10 pressures and increasing financial and workforce resource constraints.

Under the CMS’ value-based purchasing rules, hospitals will be assessed on quality performance, with clinical measures weighted at 70% and patient experience measures weighted at 30%. Verifier™ Suite is the most comprehensive solution for healthcare organizations performing internal auditing that provides insight into both clinical quality and service quality. This proven technology has been stress tested by HRAA providing internal auditing services to our clients for over 10 years. Although, conducting regular audits and taking a high level view of the reimbursement landscape is required, it’s not until you roll up your sleeves and start digging into the claim details, that you will uncover hidden revenue integrity issues.
 
 
Services
 
Coding Services

The HRAA coding solution provides hospitals and physicians across the United States with an experienced team of backlog coders to assist facility coding departments or provide outsourcing services. Certified HRAA associates supply hospitals and physicians with medical coding and billing expertise, while reducing the risk of error and maximizing accuracy, efficiency and profitability. Medical coding is the process of taking information from a wide variety of patient medical records, charts and notes, and converting it into an alphanumeric data set. The data set then drives the payment for the services rendered when submitted to Medicare, Medicaid, commercial payers and other healthcare providers. Medical coders analyze the documentation maintained within medical records and assign codes that drive reimbursement. Additionally, the data set is utilized as a collection methodology for tracking diseases, quality of care and treatment.
 
Billing & Coding Audits
 
HRAA’s team motivates excellence and reimbursement proficiency through customized, hands-on, strategy-focused and in-depth approach to the issues facing hospitals today and preparing them for tomorrow. While increasing profits for healthcare professionals remains a moving target, it is paramount to focus attention on compliant reimbursement dollars.

Education

We offer various training and educational opportunities to our clients, including Education Sessions, Coding Boot Camps, Workshops, and Webinars.
 
Consulting

We have specialized in building reimbursement proficiency by focusing on the entire revenue cycle, not just coding, and by providing RAC oriented audits, education and consulting services. Because our approach is to focus on the client’s needs and develop the solution on an individual basis, our team possesses extensive experience in revenue cycle issues. We focus not merely on the revenue and codes, but on their operational uses. HRAA’s consulting services provide secure and effective solutions for complex regulatory challenges, internal inefficiencies and revenue cycle analysis.
 
ICD-10 Transition Services
 
The transition to ICD-10 codes is not just a coding conversion; it is a change that impacts virtually all areas of the revenue cycle. HRAA’s unique approach to this business transition is multidimensional, providing organizations with a smooth and sustainable transition. HRAA offers “turn-key ICD-10 services” to assist clients with all aspects of the transition, with great emphasis on streamlined comprehensive training while maintaining productivity.

HRAA's ICD-10 Transition Services Include ICD Visualizer ™, Needs Assessment, ICD-9/ICD-10 Dual Audit, Education, Reserved Medical Coder Personnel, Auditing, Continuous Support.

Business Intelligence

HRAA offers Business Intelligence Services to help clients interpret data and make healthcare organizations more efficient and effective.

HRAA Business Intelligence team offers a number of solutions including: Implementation of Visualizer ™ Suite products, Deployment of solution templates, Development of custom applications. HRAA solution template offers the flexibility to customize the solution to meet client's needs without having to start application development from scratch.

HRAA's implementation experience of templates include: Surgery Center Analytics, Revenue Cycle Management, Customer satisfaction surveys, Hospital Statistics, Quality measures.

Physician Services

Certified coders and auditors are fully trained and are required to maintain continuing education each year to uphold their certification. HRAA is proactive providing each coder and auditor with many opportunities for additional training to make certain we are always providing the highest quality standard you expect from HRAA. HRAA takes each encounter through a rigorous review in-line with the documentation guidelines used by CMS.

The education that follows an audit includes the basic fundamentals of appropriate documentation for the levels of service billed. Physician will be introduced to the specific issues noted within the documented service. Recommendations on how to improve upon the documentation will be discussed, including template usage, appropriate EHR revisions, form creation, and so forth.
 
 
Three months ended September 30, 2013 compared to September 30, 2012
 
Results of Operations
 
The following table presents a summary of operating information for the three months ended September 30, 2013 and 2012:
 
   
For the three months ended
             
   
September 30,
2013
   
September 30,
2012
   
Increase/
(Decrease) $
   
Increase/
(Decrease) %
 
Revenue
 
$
1,790,825
   
$
1,985,516
   
$
(194,691
)
   
(9.81
)%
Revenue – Related Party
   
60,552
     
-
     
60,552
     
100.00
%
Total Revenue
   
1,851,377
     
1,985,516
     
(134,139
)
   
(6.76
)%
Costs of Revenues
   
1,088,442
     
758,267
     
330,175
     
43.54
%
Gross profit
   
762,935
     
1,227,249
     
(464,314
)
   
(37.83
)%
                                 
Selling and administrative expenses
   
1,898,595
     
1,069,870
     
828,725
     
77.46
%
Research and development expenses
   
-
     
926
     
(926)
     
(100.00
)%
Asset impairment
   
946,931
     
-
     
946,931
     
100.00
%
Depreciation and amortization
   
19,616
     
14,007
     
5,609
     
40.04
%
Total operating expenses
   
2,865,142
     
1,084,803
     
1,780,339
     
164.11
%
Operating income (loss)
   
(2,102,207
)
   
142,446
     
(2,244,653
)
   
(1,575.79
)%
Other expense, net
   
(459,268
)
   
(372,595
)
   
(86,673
)
   
23.26
%
Net loss
 
$
(2,561,475
)
 
$
(230,149
)
 
$
(2,331,326
)
   
1,012.96
%
 
Revenue:

Revenue decreased by $134,139 or approximately 7%, from $1,985,516 for the three months ended September 30, 2012 to $1,851,377 for the three months ended September 30, 2013.  The decrease was due primarily to reduction in education revenue as a result of the shift in the Company’s focus to technology and research development of our business intelligence   Visualizer   business software products.
 
Cost of Revenues:
 
Cost of revenues increased by $330,175 or approximately 44%, from $758,267 for the three months ended September 30, 2012 to $1,088,442 for the three months ended September 30, 2013. The increase was due primarily to additional personnel and related training costs associated with the build-up of the Company’s audit and coding service provider personnel required to service the anticipated increase in service contracts in future periods.
 
Gross Profit:
 
Gross profit decreased by $464,314, or approximately 38%, from $1,227,249 for the three months ended September 30, 2012 to $762,935 for the three months ended September 30, 2013.  The decrease in gross profit is primarily attributable to higher payroll cost, lower utilization rates, and a general decline in education revenue.
 
Selling and Administrative Expenses:
 
Selling and administrative expenses were $1,898,595 for the three months ended September 30, 2013, an increase of $828,725 or 77%, from $1,069,870 for the three months ended September 30, 2012.  The change in the 2013 period compared to the 2012 period was primarily due to:
 
Personnel costs have increased by $389,264 or approximately 63%, from approximately $615,000 for the three months ended September 30, 2012 to $1,005,075 for the three months ended September 30, 2013.  The increase is due primarily to increased compensation and related expenses associated with the build-up of the Company’s management, sales and administrative staff in anticipation of growth in business volume.
   
Professional fees have increased from $132,091 for the three months ended September 30, 2012 to $297,354 for the three months ended September 30, 2013, an increase of $165,242, or approximately 125%.This increase is attributable to legal, audit, consulting, investor and public relations, and accounting services provided in connection with expenses associated with financial reporting matters.
 
The remainder of the increase in Selling and administrative expenses is related to costs associated to the company’s business development such as marketing, communications, trade shows and seminars.
 
Research and Development Expenses:
 
We had no research and development expenses for the three months ended September 30, 2013, a decrease of $926, or 100%, for the three months ended September 30, 2012. The decrease is due to a significant reduction in the technology department personnel and Information Technology research projects. The Company lacked the available financial resources to invest in research and development.
 
Asset Impairment
 
At the end of September, 2013, the Company re-evaluated the capitalized research and development costs for the Visualizer   software suite of multiple offerings and the OMC Initiator after an evaluation based in part on the lack of cash flow and customer demand in ICD   Visualizer   after the general acceptance release date of July 15, 2013. In addition, the Company also considered its going concern opinion and cash liquidity concerns that restrain the ability to make capital investments in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. As a result of this evaluation, the Company recorded a loss of $946,931 that is presented as a line item entitled “asset impairment” on the consolidated statement of operations.
 
 
Depreciation and Amortization Expenses:
 
Depreciation and amortization expenses were approximately $84,000 for the three months ended September 30, 2013, an increase of approximately $70,000, or 500%, from approximately $14,000 for the three months ended September 30, 2012. The increase was primarily due to the amortization of the   Visualizer   software product that had a general release date of July 15, 2013.
 
Interest Expense (included in other expenses, net):
 
Interest Expense was approximately $357,000 for the three months ended September 30, 2013, a decrease of approximately $21,000, from approximately $378,000 for the three months ended September 30, 2012. The decrease in interest expense is primarily due to reduced finance charges related to the amortization of debt.
 
Net Income (loss):
 
As a result of the above factors, a net loss of approximately $2,561,000 was recognized for the three months ended September 30, 2013 as compared to net loss of approximately $230,000 for the three months ended September 30, 2012, an increase of approximately $2,331,000 or approximately 1013%.  The increase in net loss is outlined above.
 
Nine months ended September 30, 2013 compared to September 30, 2012
 
Results of Operations
 
The following table presents a summary of operating information for the nine months ended September 30, 2013 and 2012:
 
   
For the nine months ended
   
Increase/
   
Increase/
 
   
September 30,
2013
   
September 30, 
2012
   
(Decrease)
$
   
(Decrease)
%
 
Revenue
 
$
5,787,811
   
$
3,619,611
   
$
2,168,200
     
59.90
%
Revenue – Related Party
   
287,626
     
-
     
287,626
     
100.00
Total Revenue
   
6,075,437
     
3,619,611
     
2,455,826
     
67.85
Costs of Revenues
   
3,049,394
     
1,642,619
     
1,406,775
     
85.64
%
Gross profit
   
3,026,043
     
1,976,992
     
1,049,054
     
53.06
%
                                 
Selling and administrative expenses
   
5,284,354
     
2,726,475
     
2,557,879
     
93.82
%
Research and development expenses
   
289
     
54,059
     
(53,770
)
   
(99.47
)%
Asset impairment
   
946,931
     
-
     
946,931
     
100.00
Depreciation and amortization
   
64,214
     
36,758
     
27,456
     
74.69
%
Total operating expenses
   
6,295,788
     
2,817,292
     
3,478,496
     
123.47
%
Operating income (loss)
   
(3,269,745
)
   
(840,300
)
   
(2,429,445
)
   
289.12
%
Other expense, net
   
(823,619
)
   
(383,437
)
   
(440,182
)
   
114.80
%
Net loss
 
$
(4,093,364
)
 
$
(1,223,737
)
 
$
(2,869,627
)
   
234.50
%
 
Revenue:

Revenue increased by $2,455,826 or approximately 68%, from $3,619,611 for the nine months ended September 30, 2012 to $6,075,437 for the nine months ended September 30, 2013.  The increase was due primarily to increased revenue generated as a result of an increase in business development and marketing efforts put forth by HRAA.
 
Cost of Revenues:
 
Cost of revenues increased by $1,406,775 or approximately 86%, from $1,642,619 for the nine months ended September 30, 2012 to $3,049,394 for the nine months ended September 30, 2013. The increase was due primarily to additional  personnel and related training costs associated with the build-up of the Company’s audit and coding service provider personnel required to service the anticipated increase in service contracts in future periods.
 
Gross Profit:
 
Gross profit increased by $1,049,054, or approximately 53%, from $1,976,992 for the nine months ended September 30, 2012 to $3,026,043 for the nine months ended September 30, 2013.  The increase in gross profit was due to the increase in business experienced during the year.
 
Selling and Administrative Expenses:
 
Selling and administrative expenses were $5,284,354 for the nine months ended September 30, 2013, an increase of $2,557,879 or 94%, from $2,726,475 for the nine months ended September 30, 2012.  The change in the 2013 period compared to the 2012 period was primarily due to:
 
Personnel costs have increased by approximately $1,604,308 or approximately 108%, from approximately $1,483,292 for the nine months ended September 30, 2012 to approximately $3,087,600 for the nine months ended September 30, 2013. The increase is due primarily to increased compensation and related expenses associated with the build-up of the Company’s management, sales and administrative staff in anticipation of growth in business volume.
 
 
Professional fees have increased from $234,703 for the nine months ended September 30, 2012 to $618,195 for the nine months ended September 30, 2013, an increase of $383,492, or approximately 163%.
 
This increase is attributable to legal, audit, consulting, investor and public relations, and accounting services provided in connection with expenses associated with financial reporting matters.
 
The remainder of the increase in Selling and administrative expenses is related to costs associated to the company’s business development such as marketing, communications, trade shows and seminars.
 
Research and Development Expenses:
 
Research and development expenses were $289 for the nine months ended September 30, 2013, a decrease of approximately $54,000, or 100%, for the nine months ended September 30, 2012. The decrease is due to a significant reduction in the technology department personnel and Information Technology research projects. The Company lacked the available financial resources to invest in research and development. 
 
Asset Impairment
 
At the end of September, 2013, the Company re-evaluated the capitalized research and development costs for the Visualizer   software suite of multiple offerings and the OMC Initiator after an evaluation based in part on the lack of cash flow and customer demand in ICD   Visualizer   after the general acceptance release date of July 15, 2013. In addition, the Company also considered its going concern opinion and cash liquidity concerns that restrain the ability to make capital investments in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. As a result of this evaluation, the Company recorded a loss of $946,931 that is presented as a line item entitled “asset impairment” on the consolidated statement of operations.

Depreciation and Amortization Expenses:
 
Depreciation and amortization expenses were approximately $128,300 (which includes $64,000 of amortization included in direct cost of sales) for the nine months ended September 30, 2013, an increase of approximately $91,500, or 249%, from approximately $36,800 for the nine months ended September 30, 2012. The increase was primarily due to the amortization of the   Visualizer   software product that had a general release date of July 15, 2013. There were also incremental depreciation costs associated with the Company’s purchases for computer equipment necessary to support the increase in personnel.

Interest Expense (included in other expenses, net):
 
Interest Expense was approximately $722,000 for the nine months ended September 30, 2013, an increase of approximately $329,000, or 84% from approximately $393,000 for the nine months ended September 30, 2012. The increase is due to the factoring fees experienced during the year along with interest on outstanding debt obligations and amortization of debt discounts.
 
Net Income (loss):
 
As a result of the above factors, a net loss of approximately $4,093,000 was recognized for the nine months ended September 30, 2013 as compared to net loss of approximately $1,224,000 for the nine months ended September 30, 2012, an increase of approximately $2,869,000 or approximately 234%.  The increase in net loss is outlined above.
 
Non-GAAP – Financial Measures

The following discussion and analysis includes both financial measures in accordance with GAAP, as well as a non-GAAP financial measure.  Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP.   Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures.  They may not be indicative of the historical operating results of the Company nor is it intended to be predictive of potential future results.  Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

We believe that both management and shareholders benefit from referring to the following non-GAAP financial measure in planning, forecasting and analyzing future periods. Our management uses this non-GAAP financial measure in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management uses and relies on the following non-GAAP financial measure:

Adjusted EBITDA from continuing operations

Our management believes Adjusted EBITDA from continuing operations is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period to period after removing the impact of items of a non-operational nature that affect comparability.  Our management recognizes that Adjusted EBITDA from continuing operations, like EBITDA from continuing operations, has inherent limitations because of the excluded items.
 
We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP.  We believe that providing the non-GAAP financial measure, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies.  In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measure to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.
 
 
The Company defines Adjusted EBITDA from continuing operations as earnings (or loss) before interest expense, income taxes, depreciation and amortization asset impairment, loss on early extinguishment of debt, and non-cash stock-based compensation.  The Company excludes stock-based compensation because it is non-cash in nature.  The following table presents a reconciliation of Adjusted EBITDA from continuing operations to Net Income (loss) from continuing operations allocable to common shareholders, a GAAP financial measure:
 
   
For the three months ended
   
For the nine months ended
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2013
   
2012
   
2013
   
2012
 
Net loss
 
$
(2,561,475
)
 
$
(230,149
)
 
$
(4,093,364
)
 
$
(1,223,737
)
  Interest expense
   
357,127
     
377,954
     
721,829
     
392,888
 
  Asset Impairment
   
946,931
     
-
     
946,931
     
-
 
  Loss on early extinguishment of debt
   
112,583
     
-
     
112,583
     
-
 
  Depreciation and amortization
   
83,753
     
14,007
     
128,351
     
36,758
 
  Stock based compensation expense
   
192,130
     
-
     
290,162
     
-
 
Adjusted EBITDA (loss) from operations
 
$
(868,951
)
 
$
161,812
   
$
(1,893,508
)
 
$
(794,091
)
 
Liquidity and Capital Resources
 
The Company’s principal sources of liquidity include proceeds from long term debt and private placement of its shares. Overall, for the nine months ended September 30, 2013, the Company generated $2,503,000 from its financing activities primarily associated with the debt and equity financing. Such proceeds, coupled with its beginning cash balances, were utilized by the Company to fund its negative cash flow from operating activities in the amount of approximately $1,454,000 and investment in capitalized software, property and equipment of approximately $761,000.
 
As of September 30, 2013, the Company had cash balances of approximately $186,000 as compared to approximately $57,000 as of September 30, 2012, an increase of approximately $129,000.
 
Net cash used in operating activities was approximately $1,454,000 for the nine months ended September 30, 2013. This compared to net cash used by operating activities of approximately $872,000 for the nine months ended September 30, 2012. The increase of $582,000 was used to fund a net loss of $4,093,364 reduced by non-cash depreciation of $128,351, asset impairment of $946,931, loss on early extinguishment of debt of $112,583 stock compensation expense of $290,162, amortization of debt discount of $322,476, bad debt of $124,082, and changes in operating assets and liabilities totaling $715,099.
 
Net cash used in investing activities for the nine months ended September 30, 2013 was approximately $761,000 compared to approximately $102,000 for the nine months ended September 30, 2012. The increase is primarily attributable to the development of software.
 
Net cash provided by financing activities amounted to approximately $1,507,000 for the nine months ended September 30, 2013, compared to net cash provided in the nine months ended September 30, 2012 of approximately $833,000, representing an increase in net cash flow from financing activities of approximately $674,000. This was due to the receipt of net proceeds from the Company’s issuance of stock, net borrowings from new and existing debt obligations, offset by various debt repayments.
 
Financing:
 
The Company has the following financing arrangements:
 
1.
The revolving line of credit for $150,000 with Bank of America for working capital needs was modified on September 19, 2013. The loan no longer has an expiration date of December 18, 2018, but instead a final maturity date of September 19, 2017. The interest rate per year is equal to the Bank’s Prime Rate plus 3.5 percentage points. The revolving line of credit was consolidated with an existing bank term loan  Bank’s prime rate of interest at September 30, 2013 was 3.25%. First payment of approximately $3,200 was paid October 19, 2013.
 
2.
A term loan with Bank of America whose proceeds were used for general working capital. The term loan has been consolidated with an existing line of credit. The loan is personally guaranteed by one of the Company’s stockholders and is collateralized by the assets of HRAA. The balance due as of September 19, 2013 the date of the consolidation was approximately $20,697.
 
3.
A mortgage made to HRAA’s subsidiary related to certain real estate which houses HRAA’s main offices in Plantation, Florida.  The loan originated in July 2010 in the amount of $192,500 and matures July 2020, when a balloon principal payment of approximately $129,000 becomes due.  The loan is collateralized by the real estate and is personally guaranteed by a stockholder of HRAA. Interest is fixed at 6.625% for the first five years of the loan, and converts to an adjustable rate for the second five years at the Federal Funds Rate plus 3.25%, as established by the United State Federal Reserve.  The balance under this mortgage loan as of September 30, 2013 was approximately $176,000. Monthly payments for principal and interest are approximately $1,500 until July 2015, when the total monthly payment may vary due to the adjustable interest rate provision in the note.
 
4.
A factoring facility with a finance company whereby, under the terms of the agreement, the Company, at its discretion, assigns the collection rights of its receivables to the finance company in exchange for an advance rate of 85% of face value.  The assignments are transacted with recourse in the event of non-payment.   For the three months ended September 30, 2013, the Company had factored approximately $1,108,000 of receivables and had received cash advances of approximately $1,090,309. Outstanding receivables purchased by the factor as of September 30, 2013 were approximately $522,000 and included in accounts receivable in the accompanying unaudited condensed consolidated balance sheet, and the secured loan due to the lender was approximately $444,000. Factor fees in 2013 were approximately $104,000, and are included in interest expenses.
 
5.
The Company leases certain office equipment under non-cancellable operating lease arrangements.  Monthly payments under the lease agreements are approximately $500 as of September 30, 2013.
 
6.
During December 2012 and January 2013, the Company entered into a round of Loan Agreement and Promissory notes totaling $2,035,000. As of December 31, 2012, the Company had received $815,000.  The remainder of $1,220,000 was received in January and February 2013.
 
The Company’s Merger yielded cash from the sale of common stock that was approximately $600,000 short of the expected amount to be raised in order in order to execute its growth plan for the near future. Since the time of the Merger, the Company has transacted equity capital raises totaling approximately $1,685,000 of additional capital infusion. The Company has continued its build-up of the personnel and business development efforts and has incurred operating losses. As a result, the Company possesses a working capital of $26,892 at September 30, 2013 and continues to hold discussions with interested parties regarding additional investment in the Company’s common stock in amounts which approximate its current estimated working capital shortfall. Should efforts to raise additional capital prove to be unsuccessful; the Company will reduce its growth plans accordingly.
 
Year ended December 31, 2012 compared to the year ended December 31, 2011

Results of Operation

The following table presents a summary of operating information for the year ended December 31, 2012 and 2011:
 
   
Year-ended
   
Year-ended
   
Increase/
   
Increase/
 
   
December 31,
   
December 31,
   
(Decrease)
   
(Decrease)
 
   
2012
   
2011
   
($)
   
(%)
 
                         
Revenues
 
$
5,806,848
   
$
1,432,773
   
$
4,374,075
     
305.3
%
Cost of Revenues
   
2,830,008
     
473,719
     
2,356,289
     
497.4
%
Gross profit
   
2,976,840
     
959,054
     
2,017,786
     
210.4
%
                                 
Selling and administrative expenses
   
3,853,820
     
1,976,655
     
1,877,165
     
95.0
%
Research and development expenses
   
64,386
     
93,489
     
(29,103
)
   
(31.1
)%
Depreciation and amortization
   
50,765
     
31,362
     
19,403
     
61.9
%
Other expenses, net
   
465,339
     
29,468
     
435,871
     
1,479.1
%
Net income (loss)
 
$
(1,457,470
)
 
$
(1,171,921
)
 
$
(285,549
)
   
24.4
%
 
Revenue:

Revenue increased by approximately $4,374,000 or approximately 305%, from approximately $1,433,000 for the year ended December 31, 2011 to $5,807,000 for the year ended December 31, 2012.  The increase was due primarily to increased revenue generated as a result of an increase in business development and marketing efforts put forth by HRAA.
 
 
Cost of Revenues:
 
Cost of revenues increased by approximately $2,356,000 or approximately 497%, from approximately $474,000 for the year ended December 31, 2011 to approximately $2,830,000 for the year ended December 31, 2012.  The increase was due primarily to greater personnel and related training costs associated with the buildup of the Company’s audit and coding service provider personnel required to service the anticipated increase in service contracts in future periods. Specifically, as of December 31, 2012, the Company employed 77 service providers, who have to go through a period of training, as compared to 5 service providers as of December 31, 2011.
 
Gross Profit:
 
Gross profit increased by approximately $2,018,000, or approximately 210%, from approximately $959,000 for the year ended December 31, 2011 to approximately $2,977,000 for the year ended December 31, 2012.  The increase in gross profit was due to the increase in business experienced in the year.
 
Selling and Administrative Expenses:
 
Selling and administrative expenses were approximately $3,854,000 for the year ended December 31, 2012, an increase of approximately $1,877,000 or 95%, from approximately $1,977,000 for year ended December 31, 2011.  The change in the 2012 period compared to the 2011 period was primarily due to:
 
Personnel costs have increased by approximately $1,735,000 or approximately 510%, from approximately $340,000 for the year ended December 31, 2011 to approximately $2,075,000 for the year ended December 31, 2012. The increase is due primarily to increased compensation and related expenses associated with the buildup of the Company’s management, sales and administrative staff in anticipation of growth in business volume.
 
Travel/Business Development has increased by approximately $295,000 or approximately 220%, from approximately $134,000 for the year ended December 31, 2011 to approximately $429,000 for the year ended December 31, 2012. The increase was due primarily to sales team efforts to develop new business growth.
 
Professional fees have increased from approximately $82,000 for the year ended December 31, 2011 to approximately $395,000 for the year ended December 31, 2012, an increase of approximately $313,000, or 382%.  This increase is attributable to legal and accounting services provided in connection with the merger and two subsequent capital rises, and expenses associated with audit and review services.
 
The remainder of the increase in Selling and administrative expenses is related to costs associated to the company’s business development such as marketing, trade shows and seminars. The increases were partially offset by decreased expenses of approximately $464,000.

Research and Development Expenses:
 
Research and development expenses were approximately $64,000 for the year ended December 31, 2012, a decrease of approximately $29,000, or 31%, from approximately $93,000 for the year ended December 31, 2011. The decrease is due to the capitalization of expenses related to the development of the   Visualizer ™ suite.
 
Depreciation and Amortization Expenses:
 
Depreciation and amortization expenses were approximately $51,000 for the year ended December 31, 2012, an increase of approximately $20,000, or 61%, from approximately $31,000 for the year ended December 30, 2011. The increase was primarily due to depreciation costs associated with the Company’s purchases for office furniture and computer necessary to support the increase in personnel.
 
 
Interest Expense (included in other expenses, net):
 
Interest Expense was approximately $465,000 for the year ended December 31, 2012, an increase of approximately $436,000, from approximately $29,000 for the year ended December 31, 2011. The increase is primarily due to the factoring fees in 2012 along with interest on outstanding debt obligations and a $300,000 non-cash expense related to the amortization of a $300,000 beneficial conversion feature which was expensed during the year ended December 31, 2012. Additionally, de minimums other income offset interest expense in the above captioned account "Other expense, net".
 
Net Loss:
 
As a result of the above factors, a net loss of approximately $1,457,000 was recognized for year ended December 31, 2012 as compared to net loss of approximately $1,172,000 for the year ended December 31, 2011, a decrease in income of approximately $285,000 or approximately 24%.  The increase in net loss is outlined above.
 
Non-GAAP – Financial Measures
 
The following discussion and analysis includes both financial measures in accordance with GAAP, as well as a non-GAAP financial measure.  Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP.   Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures.  They may not be indicative of the historical operating results of the Company nor is it intended to be predictive of potential future results.  Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.
 
We believe that both management and shareholders benefit from referring to the following non-GAAP financial measure in planning, forecasting and analyzing future periods. Our management uses this non-GAAP financial measure in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management uses and relies on the following non-GAAP financial measure:
 
Adjusted EBITDA from continuing operations

Our management believes Adjusted EBITDA from continuing operations is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period to period after removing the impact of items of a non-operational nature that affect comparability.  Our management recognizes that Adjusted EBITDA from continuing operations, like EBITDA from continuing operations, has inherent limitations because of the excluded items.
 
We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP.  We believe that providing the non-GAAP financial measure, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies.  In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measure to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.
 
 
The Company defines Adjusted EBITDA from continuing operations as earnings (or loss) before interest expense, income taxes, depreciation and amortization, and non-cash stock-based compensation.  The Company excludes stock-based compensation because it is non-cash in nature.  The following table presents a reconciliation of Adjusted EBITDA   from continuing operations   to Net Income (loss) from continuing operations allocable to common shareholders, a GAAP financial measure:
 
   
For the year ended
 
   
December 31,
2012
   
December 31,
2011
 
Net loss
 
$
(1,457,470
)
 
$
(1,171,921
)
  Interest expense
   
465,349
     
29,468
 
  Depreciation and amortization
   
50,765
     
31,362
 
  Stock based compensation expense
   
-
     
818,595
 
Adjusted EBITDA (loss) from operations
 
$
(941,356
 
$
(292,496
 
Liquidity and Capital Resources
 
The Company’s principal sources of liquidity include proceeds from long term debt and private placement of its shares. Overall, for the year ended December 31, 2012, the Company generated approximately $2,803,000 from its financing activities primarily associated with the debt and equity financing.  Such proceeds, coupled with its beginning cash balances, were utilized by the Company to fund its negative cash flow from operating activities in the amount of approximately $1,699,000 and investment in property and equipment of approximately $280,000.
 
As of December 31, 2012, the Company had cash balances of approximately $894,000 as compared to approximately $199,000 as of December 31, 2011, an increase of approximately $695,000.
 
Net cash used in operating activities was approximately $1,699,000 for the year ended December 31, 2012.  This compared to net cash used by operating activities of approximately $66,000 for the year ended December 31, 2011. The decrease of $1,633,000 was primarily due to higher personnel costs, greater travel and business development costs, and professional fees connected to the Company’s merger with HRAA which occurred in February 2012 along with non-cash charges of $355,573.
 
Net cash used in investing activities for the year ended December 31, 2012 was approximately $280,000 compared to approximately $47,000 for the year ended December 31, 2011.  The increase is primarily attributable to the development of software.
 
Net cash provided by financing activities amounted to approximately $2,674,000 for the year ended December 31, 2012, compared to net cash provided in the year ended December 31, 2011 of approximately $256,000, representing an increase in net cash flow from financing activities of approximately $2,418,000.  This was due to the receipt of net proceeds from the Company’s issuance of stock, advances on convertible promissory notes, and net borrowings from new and existing debt obligations offset by various debt repayments.

Financing:
 
The Company has the following financing arrangements:
 
1.
The revolving line of credit for $150,000 with Bank of America for working capital needs was modified on December 18, 2012. The loan no longer has an expiration date of December 18, 2012, but instead a final maturity date of December 18, 2018. The interest rate per year is equal to the Bank’s Prime Rate plus 6.5 percentage points. The Bank’s prime rate of interest at December 31, 2012 was 3.25%. First payment of $2,083 was due January 18, 2013.
 
2.
A term loan with Bank of America whose proceeds were used for general working capital. The loan is personally guaranteed by one of the Company’s stockholders and is collateralized by the assets of HRAA. Payments of principal and interest are approximately $2,700 per month. The loan matures in five years from September 2009, and incurs interest at the rate of 6.75% per annum. The balance due as of December, 2012 was approximately $39,000.
 
3.
A mortgage made to HRAA’s subsidiary related to certain real estate which houses HRAA’s main offices in Plantation, Florida.  The loan originated in July 2010 in the amount of $192,500 and matures July 2020, when a balloon principal payment of approximately $129,000 becomes due.  The loan is collateralized by the real estate and is personally guaranteed by a stockholder of HRAA. Interest is fixed at 6.625% for the first five years of the loan, and converts to an adjustable rate for the second five years at the Federal Funds Rate plus 3.25%, as established by the United State Federal Reserve.  The balance under this mortgage loan as of December 31, 2012 was approximately $180,000. Monthly payments for principal and interest are approximately $1,500 until July 2015, when the total monthly payment may vary due to the adjustable interest rate provision in the note.
 
4.
A factoring facility with a finance company whereby, under the terms of the agreement, the Company, at its discretion, assigns the collection rights of its receivables to the finance company in exchange for an advance rate of 85% of face value.  The assignments are transacted with recourse in the event of non-payment.  During 2012, the Company had factored approximately $3,850,000 of accounts receivable and had received cash advances of approximately $3,272,000 with a balance due to factor of approximately $827,000 at December 31, 2012.
 
5.
The Company leases certain office equipment under non-cancelable operating lease arrangements.  Monthly payments under the lease agreements are approximately $500 as of December 31, 2012.
 
6.
On May 14, 2012, the Company entered into a round of Convertible Promissory notes totaling $300,000.  These loans were to mature on May 14, 2013.  The loans converted to common stock on July 15, 2012.
 
7.
During December 2012 and January 2013, the Company entered into a round of Loan Agreement and Promissory notes totaling $2,035,000. As of December 31, 2012, the Company had received $815,000.  
 
 
The Company’s recent merger yielded cash from the sale of common stock that was approximately $600,000 short of the expected amount to be raised in order to execute its growth plan for the near future.  Since the time of the Merger, the Company has transacted equity capital raises totaling approximately $1,060,000 of additional capital infusion.  The Company has continued its buildup of the personnel and business development efforts and has incurred operating losses.  As a result, the Company possesses a working capital of approximately $157,000 at December 31, 2012 and continues to hold discussions with interested parties regarding additional investment in the Company’s common stock in amounts which approximate its current estimated working capital shortfall. Should efforts to raise additional capital prove to be unsuccessful; the Company will reduce its growth plans accordingly.
 
Going Concern

The Company’s future success is dependent upon its ability to achieve profitable operations and generate cash from operating activities, and upon additional financing, management believes they can raise the appropriate funds needed to support their business plan and develop an operating company which is cash flow positive.

However, as of September 30, 2013, the Company has an accumulated deficit and for the three and nine months ended September 30, 2013, incurred net losses, and has used net cash in operations. The Company has not been able to generate sufficient cash from operating activities to fund its on-going operations. There is no guarantee that the Company will be able to generate enough revenue and/or raise capital to support its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
 
On November 12, 2013, the Company entered into a Securities Purchase Agreement for the equity sale of $5.4 million in Series A Preferred Stock and warrants to purchase shares of the Company’s Common Stock. The net proceeds to the Company after commissions, professional fees, and payment of shareholder loans is $4,322,000. The net raise is sufficient to fund on-going operations for the next several months. However, the funding is not sufficient to alleviate the on-going concern issue.
 
2014 Outlook
 
Now that the deadline for the ICD-10 Transition is finalized for October 2014, many healthcare executives are asking, “How should we get back on track in order to mitigate our financial and compliance risk?”  In response to this question, HRAA developed the ICD Visualizer  ™. Utilizing knowledge from healthcare industry subject matter experts combined with exceptional insight into what providers really need, the ICD  Visualizer ™   assists healthcare leaders with their need to understand the exponential impact of the transition to ICD-10 and how it relates to reimbursement risks, clinical documentation quality, coding productivity and process changes.
 
By utilizing a business intelligence platform known for its ease of use and visualization capabilities, ICD Visualizer ™  is designed as a multidimensional environment that enables chief financial officers, vice presidents of payer relations, revenue cycle directors, HIM directors, coders and clinicians to explore the impact ICD-10 will have across the enterprise and within both inpatient and outpatient services.  ICD  Visualizer ™   contains a set of baseline analytics that quantify the impact across hospitals, service lines, departments and physicians.  Because ICD  Visualizer ™   has customizable analytics, analysts and executives are able to explore their own data and visualize a unique representation of their financial and operational needs well beyond the ICD-9 to ICD-10 transition phase.
 
Another outlook for 2013 and 2014 is the new Hospital Readmission Reduction Program, (HRRP), an Affordable Care Act provision, creates increasing financial penalties for hospitals with higher than expected adjusted readmissions within 30 days. The Centers for Medicare and Medicaid Services, (CMS) expect HRRP to help to control IPPS payment penalties to hospitals having higher than average readmissions within 30 days for 3 conditions: Acute Myocardial Infarction, (AMI), Heart Failure, (HF), and Pneumonia, (PN). The measures included in the policy represent high volume and high cost conditions and are endorsed by the National Quality Forum (NQF). The measures have some exclusion for readmissions that are unrelated to the prior discharge (such as planned admissions for scheduled procedures subsequent to AMI or transfers to another hospital).
 
In 2013, DRG payment rates will be reduced based on a hospital’s ratio of actual to expected readmissions. The reduction applies to the base DRG payment only and does not include IME, DSH or outlier payments. In FY 2013, the maximum payment reduction is 1 percent. In 2014, penalties double to 2% and cap at 3% in 2015. According to the CMS a total of 2,217 hospitals are expected to be penalized in the first year of the program. Of those hospitals, 307 will pay the maximum penalty at 1 percent of their regular Medicare reimbursements. The penalty cap will increase to two percent in 2014 and three percent in 2015 and new measures and metrics will be added.
 
Readmissions Visualizer ™  is a significant aspect of our value proposition for this factor. This business intelligence product is built on a premier business discovery platform that provides the ability to view current inpatient and historical readmission information through an intuitive Web interface for the purpose of decreasing readmissions within the healthcare system and to classify current census risk for readmission so care management can allocate appropriate resources.  Users can view current census including Reason for Admission, History of HF, AMI, PN, LACE Readmission Score, Emergency Room History, and more.
 
Readmissions Visualizer ™  also trends and analyses performance for predictive models to plan enterprise resource budgeting, partner planning, resource allocation and workflow interventions for care management at transitions to improve care quality and continuity.

The Company is poised to leverage these factors and more facing the healthcare industry through the sales of its products and solutions that allow healthcare organizations to view patient lifecycles horizontally as opposed to vertically thus reducing the cost of delivery and improving the delivery experience for Doctors, Nurses and Patients.
 
 
Off-Balance Sheet Arrangements

None.
 
Critical Accounting Policies
 
The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our consolidated financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements.
 
The Company is an emerging growth company; therefore we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2)(B) of the Jumpstart Our Business Startups Act. As a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates.

Allowance for doubtful accounts

Accounts receivable balances are subject to credit risk. Management has reserved for expected credit losses, sales returns and allowances, and discounts based upon past experience, as well as knowledge of current customer information. The Company believes that its reserves are adequate. It is possible, however, that the accuracy of our estimation process could be impacted by unforeseen circumstances. The Company continuously reviews its reserve balance and refines the estimates to reflect any changes in circumstances.
 
Software
 
Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985  Costs of Software to Be Sold, Leased or Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market and capitalization ceases after the general release of the software. Amortization of capitalized software development costs begins upon initial product shipment after general release. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months) using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset.  If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset. 
 
Software maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized. The cost of the software and the related accumulated amortization are removed from the accounts upon retirement of the software with any resulting loss being recorded in operations.
 
Asset Impairment
 
At the end of September, 2013, the Company re-evaluated the capitalized research and development costs for the Visualizer   software suite of multiple offerings and the OMC Initiator after an evaluation based in part on the lack of cash flow and customer demand in ICD  Visualizer  after the general acceptance release date of July 15, 2013. In addition, the Company also considered its going concern opinion and cash liquidity concerns that restrain the ability to make capital investments in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. As a result of this evaluation, the Company recorded a loss of $946,931 that is presented as a line item entitled “asset impairment” on the consolidated statement of operations.
 
Use of Estimates

Management uses estimates and assumptions in preparing financial statements.  Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.  Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include valuation of accounts receivable, valuation of property and equipment, valuation and amortization period of software, valuation of beneficial conversion features in convertible debt, valuation of equity based instruments issued for other than cash, revenue recognition, and the valuation allowance on deferred tax assets.

Revenue Recognition
 
The Company recognizes services revenue based on the proportional performance method of recognizing revenue.
 
 
A portion of the Company’s revenue is generated from medical coding audit services. Auditing revenue is invoiced in accordance with the contract, generally at three benchmark time periods which coincide with when specific, obligatory field work services have been rendered and completed, the value of this portion of the contract price has been predetermined and agreed upon, and the client has received benefit or value in the form of the independent identification of system weaknesses and risk analysis. Further, collectability is reasonably assured due to the existence of a fixed fee contract and the size and financial health of the Company’s clients. Below is a description of the general benchmarks and work phases associated with the Company’s audit services:
 
Planning Phase - work commences prior to and as soon as the contract is signed and includes setting the audit scope, scheduling of the job, assignment of audit staff, understanding the client and their systems, determination of sample size and sampling methods to be employed, and other specific items as outlined in the contract. The planning phase includes the determination of deliverables as defined in the contract, generally consisting of a listing of errors, training and a final report. The Company generally invoices and recognizes 50% of the contract value at the completion of the Planning Phase. Although all of the contracts contain a clause making the first 50% of the engagement fee due and non-refundable at this point, the Company does not deem this initial fee to be recognized as deferred revenue under SAB 104 due to the extensive amount of work to be done prior to accepting the contract.
 
Field Work Phase – is performed at the client location and generally lasts one week and encompasses actual testing of sample claims preselected in the Planning Phase. The auditor generally preloads the selected claims into the Company’s proprietary software and audits the claim records by reviewing actual medical records. The software assists the auditor in determining proper classifications and allows the auditor to compare the proper classification against what was filed in the submission made by the client to Medicare. Notes and comments are recorded and audit reports are generated. The Company generally invoices and recognizes 40% of the contract value at the completion of the Field Work Phase.
 
Reporting Phase – includes a summary of audit findings, exit conference with clients, and any other specific deliverables as determined by the contract. The Company generally invoices and recognizes the remaining 10% of the contract value at the completion of the Report Phase.
 
A portion of the Company’s revenue is derived from consulting, training and coding services provided. Revenue from these revenue streams is recognized after services are performed based on the quoted and agreed upon fee contained in its contracts.
 
For our education products sold on a self-study standalone basis or in multiple element contracts which include training and the product and training are separable elements (see below) revenue is recognized for the product upon passing of title which occurs once the end user is granted access to our online curriculum courses.
 
The Company had a general release of its first software product in July 2013.  Software sales on a standalone basis will be recognized upon delivery of the software when evidence of the purchase arrangement exists and the price is determinable, and when collectability is reasonably assured.

Arrangements with customers may involve multiple elements including software products, education products, training, software product maintenance, coding services, coding audit services and other consulting services. Training on education products will occur after the education product sale. Education products are sold and may be used as a self-study product, although most of our customers elect to purchase our training services and therefore most of our contracts to date are multiple element contracts including one price for the education product and related training. We allocate the selling price to each element as discussed below. Training and maintenance on software products will generally occur after the software product sale. Other services may occur before or after the product sales and may not relate to the products.  Revenue recognition for multiple element arrangement is as follows:
 
Each element is accounted for separately when each element has value to the customer on a standalone basis and there is Company specific objective evidence of selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each element is recognized using the general and specific criteria under GAAP as discussed above for elements sold in non-multiple element arrangements.    A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting.  The Company has historically sold its services with established rates which it believes is Company specific objective evidence of selling price. For the new software products, management has established selling prices which qualifies as Company specific objective evidence of selling price. Generally all elements in multiple element arrangements with Company customers qualify as separate units of account for revenue recognition purposes.
 
Share Based Compensation

Compensation expense for all stock-based employee and director compensation awards granted is based on the grant date fair value estimated in accordance with the provisions of ASC Topic 718, Stock Compensation (“ASC Topic 718”). The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Vesting terms vary based on the individual grant terms.
 
The Company estimates the fair value of stock-based compensation awards on the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and are freely transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The BSM option pricing model considers, among other factors, the expected term of the award and the expected volatility of the Company’s stock price. Expected terms are calculated using the Simplified Method, volatility is determined based on the Company's historical stock price trends and the discount rate is based upon treasury rates with instruments of similar expected terms. Warrants granted to non-employees are accounted for in accordance with the measurement and recognition criteria of ASC Topic 505-50, Equity Based Payments to Non-Employees.
 
 
 
Directors and Executive Officers
 
Set forth below are the names, ages and other biographical information of our directors and executive officers as of January 31, 2014:
 
Name
 
Age
 
Position
         
Andrea Clark
 
52
 
Chief Executive Officer and Chairman of the Board
         
Robert Rubinowitz
 
47
 
Chief Operating Officer, President, Secretary, Treasurer and Director
         
Evan McKeown
 
55
 
Chief Financial Officer
         
Peter Russo
 
56
 
Director
         
Michael Brainard
 
43
 
Director
         
Dean Boyer
 
43
 
Chief Technology Officer
         
David Kroin
 
38
 
Director
         
Mitchell D. Kaye J.D.
 
45
 
Director
 
The following is a description of the business experience of each of our executive officers and directors:
 
Andrea Clark, 52, Chief Executive Officer and Chairman of the Board
 
Andrea Clark serves as our Chairman of the Board and Chief Executive Officer. Ms. Clark is a prominent health information management expert, having working with hospitals, information systems, outpatient coding, operational and compliance training expertise, including hospital-based and free-standing day surgery sites, emergency room, hospital based clinics and ancillary diagnostic service areas for the last twenty-five years. In 2001, Ms. Clark founded HRAA and has been its chief executive officer since inception. Ms. Clark received her BS in Health Information Sciences from the University of Wisconsin. She is also certified by the American Health Information Management Association as a Registered Health Information Administrator (RHIA) and by the American Academy of Professional Coders as a Certified Coding Specialist (CCS) and as a Certified Procedural Coder-Hospital (CPCH).
 
Pursuant to the terms of the Securities Purchase Agreement entered into with certain funds and accounts as to which Great Point Partners, LLC acts as an investment manager, dated November 12, 2013, an executive search committee will be established comprising of three Board of Director members to search for a new Chief Executive Officer.
 
Robert Rubinowitz, 47, Chief Operating Officer, President, Secretary, Treasurer and Director
 
Robert Rubinowitz serves as our Chief Operating Officer, President, Secretary, Treasurer and Director, overseeing all of our business operations including client relations, sales, marketing, accounting and human resources. He has served in this capacity at HRAA since June 2001. Mr. Rubinowitz has more than twenty years of experience in operations, sales and marketing. Prior to joining HRAA, Mr. Rubinowitz was General Manager of e-Commerce for PRIMEDIA as well as having served as Vice President of Marketing and e-Business at Anchor Computer. Mr. Rubinowitz was also an adjunct professor for Florida International University where he taught direct marketing. Mr. Rubinowitz received a Bachelor’s degree in Economics from Rutgers University.
 
 
Evan McKeown, 55, Chief Financial Officer
 
Mr. Evan McKeown serves as the Chief Financial Officer of the Company, and is responsible for budgeting, financial reporting and public disclosure, personnel management, as well as helping to create and oversee the financial goals of HRAA. Prior to joining the Company, Mr. McKeown was formerly the Chief Financial Officer of Perry Baromedical, a regulated medical device manufacturer and world leader in the manufacture, installation and service of FDA approved Hyperbaric Oxygen Chambers. Mr. McKeown also served as the Chief Financial Officer and Controller of National Healing Corporation, a leader in providing comprehensive outpatient wound care centers and wound and disease management solutions for hospitals. During his tenure at National Healing Corporation, Mr. McKeown gained relevant experience with healthcare coding and hospital contract negotiations. Prior to that, Mr. McKeown was the Senior Vice President, Chief Financial Officer and Chief Accounting Officer for Applied Digital, a former public company that provides RFID identification and security technology for various consumer and commercial applications. Mr. McKeown also served as a Tax Manager for Ernst and Young and was a senior accountant with Coopers & Lybrand. Mr. McKeown received his B.S. in Business Administration from the University of Maine and is licensed as a Certified Public Accountant in the state of Maine.
 
Peter Russo, 56, Director
 
Mr. Russo served as the Chief Financial Officer and Treasurer of magicJack VocalTec Ltd. from July 2010 to May 2013 and also served as its Principal Accounting Officer. Mr. Russo serves on the Advisory Board of Ocho Gaming, LLC. Ocho Gaming is a premiere operator and provider of online gaming in the Latin American market. Mr. Russo, along with his wife, is a co-founder of bracelet retailer FriendlyBands LLC. Mr. Russo also serves as a consultant to ResumeBear, a leading online job search technology company. Prior to his appointment as CFO of magicJack VocalTec Ltd., Mr. Russo served as CFO of YMax since 2005. Prior to joining YMax, from 1996-1999, he was a consultant and served as CFO of Group Long Distance, Inc. (GLD), a publicly traded reseller of local and long distance services. Prior to joining GLD, Mr. Russo was the Executive Vice President of the State Bank of South Australia. He holds a B.B.A. degree from Pace University in New York.
 
Michael Brainard, 43, Director
 
Mr. Brainard brings over 15 years of experience to the Board as a management consultant, senior executive, executive coach, manager, entrepreneur, and researcher. As a management consultant, Michael has designed and conducted process re-engineering and re-structuring, organizational assessments, leadership development initiatives, performance management systems, change management processes, and a variety of strategic planning initiatives. Additionally Michael has worked as a post-acquisition internal and external integration leader. Mr. Brainard has provided strategy and consulting services to companies such as Scripps, AMN Healthcare, AccentCare, Memorialcare, and Patient Safe Solutions. He holds a B.A. in Psychology from the University of Delaware, an M.S. in Industrial Psychology from Alliant International University and a Ph.D. in Industrial Psychology from Alliant International University.
 
Dean Boyer, 43, Chief Technical Officer
 
Mr. Boyer has over 30 years IT experience specializing in software engineering, business intelligence, performance management, data integration, healthcare and banking. As Chief Technology Officer (CTO), Mr. Boyer manages the resources and technologies required to deliver HRAA’s services and solutions. His innovative team is responsible for developing the Visualizer™ and Verifier™ product suites. These suites of products are based on QlikView’s business intelligence platform that provides an easy to use access to operational, financial and clinical healthcare information. In addition, HRAA’s IT department is developing a national remote medical coding environment that will enable HRAA to outsource medical coding operations for a variety of healthcare organizations. Over the past 25 years, he has built several IT organizations from scratch including a startup that Mr. Boyer founded in 1997 for which he raised over $42 million in venture capital. He has successfully built software products that generated over $300 million in revenue for their respective software firms and continues to develop innovative solutions for the healthcare industry. Prior to joining HRAA; Mr. Boyer was the Director of the Healthcare IT Practice for McGladrey, where he managed an IT team that specialized in business intelligence for hospitals, clinics, and healthcare organizations. Prior to McGladrey, Mr. Boyer was the Director of Worldwide Healthcare for Sybase, Inc. where he managed the healthcare and federal program offices consisting of over 200 consultants and architects that delivered product and technology solutions. Mr. Boyer is an accomplished presenter and has presented on topics such as the value of Business Intelligence in Healthcare, Building Actionable and Predictive Analytics for Physicians, and Adoption the Critical Factor in Business Intelligence for HIMSS, HFMA, and other healthcare audiences. Mr. Boyer holds a patient for point of care technology that he developed to bring the patient, payer and provider together at the point of care to settle a claim. Mr. Boyer holds a B.S. in Business Administration from Elizabethtown College.
 
 
David Kroin, 38, Director
 
Mr. Kroin has over fifteen years of investing experience and is a co-founder of Great Point Partners, LLC. Mr. Kroin is co-portfolio manager for the Biomedical Value Fund and an Investment Committee Member for GPP I and GPP II. Mr. Kroin is currently on the Boards of Connecture Inc., Cytovance Biologics and ProfesionalPT. He was previously a Board Member of US BioServices Corp. (acquired by AmerisourceBergen), Caprion Proteomics (acquired by CGP), Mediatech Acquisition Corp (acquired by Corning Inc.), Biodel, Inc. (NASD: BIOD), Gentium Spa (NASD:GENT), and several other companies. While at Great Point, Mr. Kroin has also led structured investments in several leading public companies including AMAG Pharmaceuticals (NASD:AMAG), Dynavax Technologies (NASD:DVAX), Hyperion Therapeutics (NASD: HPTX), Streamline Health (NASD: STRM) and Amarin Corp. (NASD:AMRN). Prior to Great Point Partners, Mr. Kroin was a Partner in J.H. Whitney & Co. funds and a senior member of its health care group. While at J.H. Whitney & Co., Mr. Kroin completed investments in over 25 leading growth companies. He began his career as an investment banker at Merrill Lynch & Company in mergers and acquisitions. He graduated from the University of Michigan with a B.S. in actuarial mathematics and is a currently on the Leadership Council of the University of Michigan’s Life Sciences Institute.
 
Mitchell D. Kaye J.D., 45, Director
 
Mitchell D. Kaye, J.D. is a Managing Director at BVF Partners, a biotechnology investment fund. Prior to that, from 2010-2013, he was the Chief Executive Officer of MedClaims Liaison, LLC, a consumer advocacy business that he founded and which works on behalf of families in managing reimbursement disputes with medical providers and insurance companies. From 2008-2010, Mr. Kaye was a Managing Director with Navigant Capital Advisors, a financial and strategic advisory services firm, and Head of Navigant’s Financial Institutions Restructuring Solutions Team (FIRST). While at Navigant, Mr. Kaye led numerous high profile engagements on behalf of investment funds and investors. Previously, as a successful entrepreneur in the asset management industry, Mr. Kaye launched two highly profitable asset management companies. Mr. Kaye was the founding member of Xmark Opportunity Partners, LLC, an investment fund exclusively focused on investments in publicly traded life sciences companies. In 1996, Mr. Kaye began his career as a founding member of Brown Simpson Asset Management, LLC (Brown Simpson), an investment fund that was at the foreground of private placement investing in the public markets. During his career, Mr. Kaye has consummated over 100 transactions as a lead investor, structured over a billion dollars in debt and equity-linked transactions, and taken an active role in the management of numerous portfolio companies. Mr. Kaye has served on the boards of several private and public companies, and also served on the board of the New York Alzheimer’s Association. From September 2007 until the company’s unwinding in June 2009, Mr. Kaye served on the board of directors of Genaera Corporation, a biopharmaceutical company that was listed on the Nasdaq Capital Market. Mr. Kaye received his BA from Wesleyan University, and his Juris Doctorate from Northwestern University School of Law.
 
Family Relationships
 
Our Chairman and Chief Executive Officer, Andrea Clark, is married to our Chief Operating Officer, President, Secretary and Treasurer, and Director, Robert Rubinowitz.
 
 
Involvement in Certain Legal Proceedings
 
To our knowledge, during the past ten (10) years, none of our directors, executive officers, promoters, control persons, or nominees has been:
 
the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
 
convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
 
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
 
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.
 
Section 16(a) Beneficial Ownership Compliance
 
As of the date of this report, we are not subject to Section 16(a) of the Exchange Act.
 
Corporate Governance
 
The Board has not adopted Corporate Governance Principles. Currently, the Company’s Chief Executive Officer also holds the position of Chairman of the Board of Directors. In the future, however, the Board may reconsider whether its Chief Executive Officer should also serve as Board Chairman.
 
Audit Committee and Financial Expert
 
We do not have a standing audit committee of the Board of Directors. Management has determined not to establish an audit committee at present because of our limited resources and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not have a financial expert serving on the Board of Directors.
 
Compensation Committee and Nominating Committee
 
We currently do not have a compensation committee or a nominating committee. Determining compensation for our officers and directors is done by our board of directors. Nominations for election to our board of directors may be made by the board of directors or by any stockholder entitled to vote for the election of directors in accordance with our bylaws and Nevada law.
 
Code of Conduct and Corporate Ethics Policy
 
Our Board has approved, and we have adopted, a Code of Conduct and Corporate Ethics Policy, or the Code of Conduct, which applies to all of our directors, officers and employees. Our Board has also approved, and we have adopted, a Code of Ethics for Senior Financial Officers, or the Code of Ethics for SFO, which applies to our Directors, Senior Financial Officers and management team in contact with key financial data. The Code of Conduct and the Code of Ethics for SFO are available free of charge upon written request to Health Revenue Assurance Associates, 8551 W. Sunrise Blvd. Suite 304, Plantation, Florida 33322, Attention: Chief Financial Officer.
 
 
 
Summary Compensation Table
 
The following table presents information concerning compensation for each of our named executive officers for services in all capacities during the years indicated:
 
                               
Non-equity
             
Name and
                 
Stock
   
Option
   
Incentive Plan
   
All Other
       
Principal
     
Salary
   
Bonus
   
Awards
   
Awards
   
Compensation
   
Compensation
   
Total
 
Position
 
Year
 
($)
   
($)
   
($)
   
($)
   
($)
   
($)
   
($)
 
                                               
Andrea Clark –
 
2012
   
175,000
     
     
     
     
     
19,000
(1)
   
194,000
 
Chief Executive Officer
 
2011
   
175,000
     
     
     
     
     
     
175,000
 
                                                             
Robert Rubinowitz –
 
2012
   
175,000
     
     
     
     
     
19,000
(1)
   
194,000
 
Chief Operating Officer, President and Secretary
 
2011
   
175,000
     
     
     
     
     
     
175,000
 
                                                             
Evan McKeown,
 
2012
   
     
     
     
     
     
     
 
CFO (2)
 
2011
   
     
     
     
     
     
     
 
                                                             
Dean Boyer
 
2012
 
$
135,115
     
     
     
     
     
   
$
135,115
 
Chief Technical Officer
 
2011
   
     
     
     
     
     
     
 
                                                             
Peter Russo,
 
2012
   
     
     
     
     
     
     
 
Director (3)
 
2011
   
     
     
     
     
     
     
 
                                                             
Michael Brainard,
 
2012
   
     
     
     
     
     
     
 
Director (3)
 
2011
   
     
     
     
     
     
     
 
                                                             
David Kroin
 
2012
   
     
     
     
     
     
     
 
Director (4)
 
2011
   
     
     
     
     
     
     
 
                                                             
Mitchell D. Kaye J.D.
 
2012
   
     
     
     
     
     
     
 
Director (4)
 
2011
   
     
     
     
     
     
     
 
 
(1)
This amount includes $12,000 for a car allowance and $7,000 for health insurance related costs.
 
(2)
Evan McKeown was appointed as Chief Financial Officer of the Company on April 22, 2013.
 
(3)
Messrs. Russo and Brainard were appointed as members of the Board on August 7, 2013.
 
(4)
Messrs. Kroin and Kaye were appointed as members of the Board on November 12, 2013.
 
 
Employment Agreements
 
We have entered into employment agreements with our officers and directors.
 
Employment Agreement with Andrea Clark
 
On October 2, 2013, the Company entered into an employment agreement with Andrea Clark and amended such agreement on November 12, 2013 (the “Clark Agreement”). Pursuant to the Clark Agreement, Ms. Clark will receive annual base compensation of $175,000, which may be increased but not decreased from time to time as determined by the Board of Directors of the Company. The Clark Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The term of the Clark Agreement is three (3) years and shall automatically be renewed for successive three (3) year terms thereafter, unless otherwise notified in writing ninety (90) days prior to the termination of the agreement. The Clark Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Ms. Clark is entitled to receive two times her base salary at the time of termination; a pro-rata bonus payment on any bonus or incentive plan; any earned but unpaid base salary, and accrued but unpaid vacation time. Should the Clark Agreement be terminated by Ms. Clark two years after the effective date, Ms. Clark shall be entitled to receive: any earned but unpaid base salary and bonus compensation; any earned but unpaid vacation time; a pro-rata bonus or incentive plan award; and, at Ms. Clark’s election, either (i) registered shares of the Company’s common stock equal to 100% of her base salary at the time of resignation, or (ii) fully vested and cashless exercisable discounted stock options. In the event there is: (1) a change of control of the Company; and (2) Ms. Clark is terminated within six months following such change of control, Ms. Clark shall be entitled to receive any earned but unpaid base salary, any earned but unpaid bonus compensation, two times her base salary as of the date of the change of control, two times the average bonus paid to Ms. Clark over the three previous calendar years, and accrued but unpaid vacation time.. Should the Clark Agreement be terminated in the event of death or disability of Ms. Clark, Ms. Clark or her estate, shall be entitled to receive two times her base salary immediately prior to termination, a pro-rata bonus payment on any bonus or incentive plan; earned but unpaid base salary and earned but unpaid bonus compensation, and accrued but unpaid vacation time.
 
The Clark Agreement supersedes previously entered into between the Company and Ms. Clark dated July 15, 2011.
 
Employment Agreement with Robert Rubinowitz
 
On October 2, 2013, the Company entered into an employment agreement with Robert Rubinowitz and amended such agreement on November 12, 2013 (the “Rubinowitz Agreement”).
 
Pursuant to the Rubinowitz Agreement, Mr. Rubinowitz will receive annual base compensation of $175,000, which may be increased but not decreased from time to time as determined by the Board of Directors of the Company. The Rubinowitz Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The term of the Rubinowitz Agreement is three (3) years and shall automatically be renewed for successive three (3) year terms thereafter, unless otherwise notified in writing ninety (90) days prior to the termination of the agreement. The Rubinowitz Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Mr. Rubinowitz is entitled to receive two times his base salary at the time of termination; a pro-rata bonus payment on any bonus or incentive plan; any earned but unpaid base salary, and accrued but unpaid vacation time. Should the Rubinowitz Agreement be terminated by Mr. Rubinowitz two years after the effective date, Mr. Rubinowitz shall be entitled to receive: any earned but unpaid base salary and bonus compensation; any earned but unpaid vacation time; a pro-rata bonus or incentive plan award; and, at Mr. Rubinowitz ’s election, either (i) registered shares of the Company’s common stock equal to 100% of his base salary at the time of resignation, or (ii) fully vested and cashless exercisable discounted stock options. In the event there is: (1) a change of control of the Company; and (2) Mr. Rubinowitz is terminated within six months following such change of control, Mr. Rubinowitz shall be entitled to receive any earned but unpaid base salary, any earned but unpaid bonus compensation, two times his base salary as of the date of the change of control, two times the average bonus paid to Mr. Rubinowitz over the three previous calendar years, and accrued but unpaid vacation time. Should the Rubinowitz Agreement be terminated in the event of death or disability of Mr. Rubinowitz, Mr. Rubinowitz or his estate, shall be entitled to receive two times his base salary immediately prior to termination, a pro-rata bonus payment on any bonus or incentive plan; earned but unpaid base salary and earned but unpaid bonus compensation, and accrued but unpaid vacation time.
 
The Rubinowitz Agreement supersedes previously entered into between the Company and Mr. Rubinowitz dated July 15, 2011.
 
Employment Agreement with Evan McKeown
 
On October 2, 2013, the Company entered into employment agreement with Evan McKeown and amended such agreement on November 12, 2013 (the “McKeown Agreement”).
 
Pursuant to the McKeown Agreement, Mr. McKeown will receive annual base compensation of $180,000, which may be increased but not decreased from time to time as determined by the Board of Directors of the Company. The McKeown Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The term of the McKeown Agreement is two (2) years and shall automatically be renewed for successive two (2) year terms thereafter, unless otherwise notified in writing ninety (90) days prior to the termination of the agreement. The McKeown Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Mr. McKeown is entitled to receive: (1) two times his base salary at the time of termination if terminated within six months of execution of the McKeown Addendum, and one time base salary if terminated after six months of execution of the McKeown Addendum; (2) a pro-rata bonus payment on any bonus or incentive plan; and (3) any earned but unpaid base salary, and accrued but unpaid vacation time. In the event there is: (1) a change of control of the Company; and (2) Mr. McKeown is terminated within six months following such change of control, Mr. McKeown shall be entitled to receive any earned but unpaid base salary, any earned but unpaid bonus compensation, two times his base salary as of the date of the change of control, two times the average bonus paid to Mr. McKeown over the three previous calendar years, and accrued but unpaid vacation time. Should the McKeown Agreement be terminated in the event of death or disability of Mr. McKeown, Mr. McKeown or his estate, shall be entitled to receive the greater of the base salary owed immediately prior to termination or one year’s base salary, a pro-rata bonus payment on any bonus or incentive plan; earned but unpaid base salary and earned but unpaid bonus compensation, and accrued but unpaid vacation time.
 
Additionally, Mr. McKeown was granted options to purchase 1,000,000 shares of the Company’s common stock (the “ Options ”) at a per share exercise price of the fair market value per share of the Company’s common stock at the time of execution. The Options shall vest after two years or upon termination of Mr. McKeown for any reason, whichever happens sooner.
 
 
Employment Agreement with Dean Boyer
 
On October 2, 2013, the Company entered into employment agreement with Dean Boyer and amended such agreement on November 12, 2013 (the “Boyer Agreement”).
 
Pursuant to the Boyer Agreement, Mr. Boyer will receive annual base compensation of $200,000, which may be increased but not decreased from time to time as determined by the Board of Directors of the Company. The Boyer Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The term of the Boyer Agreement is two (2) years and shall automatically be renewed for successive two (2) year terms thereafter, unless otherwise notified in writing ninety (90) days prior to the termination of the agreement. The Boyer Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Mr. Boyer is entitled to receive one times his base salary at the time of termination; a pro-rata bonus payment on any bonus or incentive plan; any earned but unpaid base salary, and accrued but unpaid vacation time. In the event there is: (1) a change of control of the Company; and (2) Mr. Boyer is terminated within six months following such change of control, Mr. Boyer shall be entitled to receive any earned but unpaid base salary, any earned but unpaid bonus compensation, two times his base salary as of the date of the change of control, two times the average bonus paid to Mr. Boyer over the two previous calendar years, and accrued but unpaid vacation time. Should the Boyer Agreement be terminated in the event of death or disability of Mr. Boyer, Mr. Boyer or his estate, shall be entitled to receive the greater of the base salary owed immediately prior to termination or one year’s base salary, a pro-rata bonus payment on any bonus or incentive plan; earned but unpaid base salary and earned but unpaid bonus compensation, and accrued but unpaid vacation time.
 
Outstanding Equity Awards at Fiscal Year-End
 
There were no outstanding equity awards held by our officers as of December 31, 2012. As of January 31, 2014, Mr. McKeown was granted options to purchase 1,000,000 shares of the Company’s common stock (the “ Options ”) at a per share exercise price of the fair market value per share of the Company’s common stock at the time of execution of the amended employment agreement.
 
Board of Directors
 
The number of directors of the Company is such number as determined by the Board. All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified, or until their earlier death, resignation or removal. Officers are elected by and serve at the discretion of the board.
 
Our directors are reimbursed for expenses incurred by them in connection with attending board meetings, but they do not receive any other compensation for serving on the Board.
 
Related Party Transactions
 
Mr. Michael Brainard and Mr. Peter Russo were elected to the Board of directors of Health Revenue Assurance Holdings, Inc. on August 8, 2013. Mr. Brainard is a Director of ResumeBear, Inc., a company with which HRAA has a sales contract worth approximately $300,000, pursuant to which HRAA provides website development services to ResumeBear, Inc. Mr. Russo is the Chief Executive Officer and director for ResumeBear, Inc. In January 2014, the Company wrote off approximately $100,000 of the receivables with ResumeBear.
 
On September 9, 2013, the Company entered into a one year Material Consulting Agreement with Mr. Michael Ciprianni to provide certain consulting services related to the Company’s business in exchange for four million one hundred twenty five thousand (4,125,000) shares of Common Stock in consideration of the services to be rendered.
 
The Company owed its CEO $75,000 as stated in the February 2012 merger agreement. The balance due to the CEO was formalized in a promissory note dated November 1, 2013. The Company also owed its President $40,000 for a promissory note dated November 1, 2013 for funds advanced in September 2013. On November 12, 2013 the promissory notes for the CEO and the President were paid in full from the net proceeds of the Securities Purchase Agreement, dated November 12, 2013.
 
Other than those listed above, there are no related party transactions reportable under Item 404(a) of Regulation S-K.
 
Director Compensation
 
On August 7, 2013, the Company entered into an agreement with each of Messrs. Russo and Brainard, our directors, to provided compensation in the form of 100,000 non-qualified stock options of the Company’s common stock, with a one year vesting period, once the Company has completed a non-qualified stock option plan.
 
Indemnification Agreements
 
In connection with the appointments of David Kroin and Mitchell Kaye, the Company and each of the new appointments to the Board entered into indemnification agreements (the “ Indemnification Agreements ”) with its officers and directors, providing for the indemnification of the officers and directors of the Company from the increased risk of litigation against such directors and officers.
 
Director Independence
 
Our Board of Directors consists of six (6) members, we have four (4) independent directors and two (2) non-independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
 
the director is, or at any time during the past three years was, an employee of the Company;
 
the director or a family member of the director accepted any compensation from the Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
 
a family member of the director is, or at any time during the past three years was, an executive officer of the Company;
 
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the Company made, or from which the Company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
 
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the Company served on the compensation committee of such other entity; or
 
the director or a family member of the director is a current partner of the Company’s outside auditor, or at any time during the past three years was a partner or employee of the Company’s outside auditor, and who worked on the company’s audit.
 
 
Involvement in Certain Legal Proceedings

To our knowledge, during the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has:
 
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
 
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
 
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
 
been found by a court of competent jurisdiction in a civil action or by the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
 
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
 
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.


Securities Authorized For Issuance Under Equity Compensation Plans

There are no securities authorized for issuance under an Equity Compensation Plan, other than 1,636,000 of stock options to employees, officers and directors.
 
Security Ownership Of Certain Beneficial Owners And Management
  
The following table sets forth information regarding the beneficial ownership of shares of our capital stock as of January 31, 2014 by:
 
Each of our directors;
 
Each of our named executive officers;
 
All of our directors and executive officers as a group; and
 
Each person known by us to beneficially own more than 5% of our outstanding common stock.
 
 
The following table sets forth certain information regarding our shares of common stock beneficially owned as of January 31, 2014, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
 
Under SEC rules, beneficial ownership includes any shares of common stock which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement. Percentage of beneficial ownership is calculated based on shares of our common stock outstanding as of January 31, 2014. In calculating the number of shares beneficially owned and the percentage ownership, shares of common stock subject to Preferred Stock conversion rights (including accrued dividends), options or warrants held by that person that are currently exercisable or convertible or become exercisable or convertible within 60 days after January 31, 2014 are deemed outstanding even if they have not actually been exercised or converted. The shares issuable under these securities are treated as outstanding for computing the percentage ownership of the person holding these securities but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, we believe that all persons named in this table have sole voting power and investment power over all the shares beneficially owned by them.
 
Title of Class
Name Beneficial Owner
 
Amount and
Nature
of Beneficial
Ownership
 
Percent
age of
Class (1)
 
Directors and Executive Officers
             
  
Common Stock
Andrea Clark*†
   
6,599,604
     
12.07
 %
Common Stock
Robert Rubinowitz*†
   
6,599,617
     
12.07
%
Common Stock
Evan McKeown
   
0
     
0
%
Common Stock
Peter Russo
   
0
     
0
%
Common Stock
Michael Brainard
   
0
     
0
%
Common Stock
David Kroin
   
0
     
0
%
Common Stock
Mitchell D. Kaye
   
0
     
0
%
Common Stock
Directors and executive officers as a group (7 people)
   
13,199,221
     
24.14
%
5% Stockholders
               
Common Stock
Andrea Clark*
   
6,599,604
     
12.07
%
Common Stock
Robert Rubinowitz*
   
6,599,617
     
12.07
Common Stock
Michael Ciprianni**
   
2,800,000
     
5.11
Common Stock
Donald Luneburg**
   
3,213,900
     
5.87
%
Common Stock
Biomedical Value Fund, L.P. (2)
   
23,057,648
     
21.22
%
Common Stock
Biomedical Institutional Value Fund, L.P. (3)
   
 6,020,924
     
5.54
Common Stock
Biomedical Offshore Value Fund, Ltd. (4)
   
 13,290,920
     
12.23
%
Common Stock
Class D Series Of Gef-Ps, L.P. (5)
   
 9,823,064
     
9.04
 
*  Andrea Clark and Robert Rubinowitz are husband and wife.