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HYPERERA INC - 10-Q - Management's Discussion and Analysis or Plan of Operation.(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-Q. Our Managements Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include specifically the risk that the Greensaver loan as described below in Loans to Greensaver Corporation may not be repaid in whole or in part as further described in this subsection and related opinion filed in our Form 10-K for the fiscal year ended December 31, 2013 and additional information from China counsel set forth in that opinion as well as the late payments from Yanqing County Hospital and Hunan Great Wall Medical Co., Ltd. as described below. Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects. Overview Existing Business Our initial business was the sale of hardware and software and the customization of clinical information system software for medical clinics and hospitals in China and throughout Asia. We have been developing our infrastructure to begin marketing clinical information system software and hardware. We have generated no hardware sales revenues for the three months period ended June 30, 2014, and cumulative revenue of $228,858 from date of inception February 19, 2008 to June 30, 2014. We continue to be unable to advance this business despite significant effort and thus again were no software sales revenues generated for the first quarter ended June 30, 2014. The Clinical Information System was developed in China by Beijing Chaoran Chuangshi Technology Co., Ltd ("Beijing Chaoran"). It was established in 2002 specializing in technology developed and service, sales of computer hardware and software, machine and electric equipment. Beijing Chaoran is located in No.28 Mujiu Road, Mujiayu Town, Miyun, Beijing, China. Beijing Chaoran is a Chinese Technology company owned 100% by Mr.Liancheng Li, the father of our Chairman Zhi Yong Li. 5 -------------------------------------------------------------------------------- We signed a three-year software distribution agreement with Beijing Chaoran on March 1, 2009. Under the terms of the agreement Beijing Chaoran authorizes Hyperera to be its exclusive sales and service agent for surgery anesthesia clinic management software and ICU management system product lines. The product lines shall include the products that Beijing Chaoran developed before the agreement signed and the products that will be developed by Beijing Chaoran during the term of the agreement. Beijing Chaoran is the exclusive supplier of the products Hyperera sells. The purchase price Hyperera will pay for all products subject to this agreement will be comparable to what Hyperera would have paid a non-related party in arm's-length transactions. Specifically, the selling price for Beijing Chaoran is determined by total actual cost of direct materials (hardware), direct labor, and allocated overhead, plus 5-10% of Beijing Chaoran's total purchase cost if Beijing Chaoran resells to Hyperera. Our operations depend heavily on the continuation of our distribution agreement with Beijing Chaoran. The agreement with Beijing Chaoran was originally for a term of three years commencing March 1, 2009, subject to earlier termination upon terms described in the Agreement. We orally agreed to extend the Agreement for three additional years upon the same terms and conditions. Although we believe such events are not likely, if they were to occur, we may not be able to find alternative suppliers if the agreement is terminated or not renewed which could reduce our revenues or cause us to cease operations. We have continued to encounter difficulties in marketing this product but our efforts are continuing. We've hired another 6 employees and rent a new office to continue the project of the sale of hardware and software and the customization of clinical information system software for medical clinics and hospitals. We are planning to sell the software of Mobile Nurse Station, Mobile Healthcare and Impatient System in China and sell relevant equipment relating to the above systems. The research and development is completed however we have made no sales and no assurance can be given if or when we would make sales. In February 2014, Hyperera and Sichuan Province Information Institute of Medicine (Sichuan Province Health Information Center) reached an agreement on the collaborative development of Deyang regional health information platform (research) project ("Deyang RHIE Project"). It is a research agreement, which no profit results. But the test results and modules from this project will be helpful to the potential cooperation in RHIE. We have continued our efforts to develop our business and ultimately generate revenues. Hyperera (Beijing) Technology Ltd. invested significant time and effort to secure a sales agent agreement with Caradigm, and finally secured the agreement in April 2014, which agreement is filed as an exhibit to this Report on Form 10-Q. With this Agreement, the Company can act as Caradigm's sales agent on a non-exclusive basis with respect to sale of certain of their products, primarily the Caradigm Intelligence Platform, in the territory of China. The Agreement is for a term of one year commencing April 19, 2014. Caradigm has its roots in healthcare and application development, and is focused exclusively on the healthcare IT market. A joint venture of Microsoft and GE Healthcare, Caradigm combines deep expertise in building platforms and ecosystems with complementary experience in clinical and administrative workflow solutions. The Caradigm Intelligence Platform (CIP) aggregates and normalizes clinical and financial data from across the care continuum to support the needs of healthcare organizations. It serves as the basis for a portfolio of software applications and analytics built to improve quality, connect providers, coordinate care and manage risk. Caradigm believes that these solutions help organizations achieve the patient outcomes, operational effectiveness and financial results they require to thrive in a dynamic and competitive healthcare environment. We are very honored to become a non-exclusive sales agent of Caradigm Beijing of [Seal] company,and we have been working hard in market development. Because it is non-exclusive selling agency, we are facing with the great pressure of competition. Although we have no sales of products under this Agreement this fiscal quarter, the Company has during this quarter worked on human resources, material and financial resources related to this Agreement. 6 -------------------------------------------------------------------------------- Additional developments in our six month period ended June 30, 2014 are as follows: During the second quarter the Company focused on development of a new product "Hyperera Medical Intelligent Patrol Box." Hyperera Medical Intelligent Patrol Box is designed for the general practitioner. It is a collection of several small mobile medical service station Point of Care Testing ("POCT") devices, including vital signs analyzer, urine analyzer, blood glucose meter, portable ECG monitor, pulse oxygen equipment, medical blood pressure monitor and a series screening equipment against common diseases, chronic diseases and frequently-occurring diseases. It is being designed to meet the need for diagnosis and treatment of general practitioners in the community, countries, village clinics, first aid or other places. Except for the basic configuration, Hyperera Medical Intelligent Patrol Box can be set up personalized according to different needs of users. Hyperera has begun to acquire various components of this product but the product is not finished and not yet ready for sale. We anticipate that we will be able to begin sales of this device in the near future but cannot give an exact date at this time. An agreement with Yanqing County Hospital (a county hospital in Beijing) was established and signed in this quarter. Yanqing County Hospital bought Hyperera wireless mobile information system software V1.0- wireless mobile outpatient infusion system and the corresponding technical services. The amount of the contract is 100,000 yuan. The system has been installed, but the payment was not received and we cannot predict when, if ever, payment will be received. During our first quarter, Hyperera entered into a contract to sell a kind of medical payment adaptor to Hunan Great Wall Medical Technology Co., Ltd. The amount of the contract with Hunan Great Wall Medical Co., Ltd. is 860,000 yuan or approximately USD $139,976. The project name is interface modification of HIS system. Hyperera has finished all work required of it under the agreement and payment is due. Although management believes payment will be received in the near future, payment has not been received as of the date of filing of this Report and we can give no assurance if or when it will be received. And a strategic co-operation framework agreement between Hyperera and Sunbase International (Holdings) Limited (Sunbase Holdings) signed on July 7, 2014 in Hong Kong. Under this contract Hyperera and Sunbase Holdings agree to joint develop the "WIT120" relative integrated solutions in the fields of hardware and software. The Agreement provides as follows: Both parties agreed on a project cost ceiling of 20 billion yuan, but the agreement does not specify any time or requirement of either party to do this. The WIT120 is a regional health information platform system that helps manage the following. · Maternal and Child Health Management Systems · residents' health records management system · the CDC Emergency Command System · infectious disease reporting system · chronic disease management system · population information database system · the new rural cooperative information system · the digital hospital information system · primary health care system · food and medicine / health supervision and management system · smart medical devices For more information, see the Agreement filed as an exhibit to this Form 10-Q. Greensaver Corp. promised to pay back¥50,000 in the second quarter of 2014, but its not happen yet, because Greensaver has difficulties in operating. The loan agreement signed before is still in process of negotiation. See Loans to Greensaver Corporation, below for further information about this problematic loan transaction. 7 -------------------------------------------------------------------------------- Emerging Growth Company We are an "emerging growth company" ("EGC") that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our Business Startups Act ("the JOBS Act"), that eases restrictions on the sale of securities; and increases the number of shareholders a company must have before becoming subject to the U.S. Securities and Exchange Commission's (SEC's) reporting and disclosure rules (See "Emerging Growth Companies" section above). We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that 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 this election, our financial statements may not be comparable to companies that comply with public company effective dates. Results of Operations For the second quarter ended June 30, 2014 vs. June 30, 2013. Revenue For the second quarter ended June 30, 2014 and 2013, the Company had $0.00 revenue for hardware sales respectively. For the second quarter ended June 30, 2014, and 2013, there were no software sales. Cost of Revenue All the products sold in the past were purchased from Beijing Chaoran. For the second quarter ended June 30, 2014 and 2013, the Company incurred zero cost of goods sold. For the second quarter ended June 30, 2014, and 2013, there was no software cost of goods sold incurred. Expense For the second quarter ended June 30, 2014, the Company incurred selling, general and administrative expenses, and depreciation expense of $ 139,909. The primary expenses were professional fee of $ 16,346, rental expense of $ 23,172, office supplies of $ 8,870, travel expense of $ 4,288 and payroll expense of $ 63,553. 8 -------------------------------------------------------------------------------- For the second quarter ended June 30, 2013, the Company incurred selling, general and administrative expenses and depreciation expense of $ 81,824. The Company is still development stage enterprise and need to secure financing activities to survive the business. And the Company was in the progress of building up the network relations and promotion of Hyperera's name and its products. Accordingly, the Company incurred significant increase of overall selling, general and administrative expenses. Income Taxes There were no income taxes. Net Loss For second quarter ended June 30, 2014, the Company had net loss of $ 139,373; for second quarter ended June 30, 2013, the Company incurred net loss of $ 42,340. At June 30, 2014, the Company had accumulated net loss of $ 1,147,443 for cumulative period from February 19, 2008 (Date of Inception) through June 30, 2014. For the six month period ended June 30, 2014 vs. June 30, 2013. Revenue For the six month period ended June 30, 2014 and 2013, the Company had $0.00 revenue for hardware sales respectively. For the six month period ended June 30, 2014, and 2013, there were no software sales. Cost of Revenue All the products sold were purchased from Beijing Chaoran. For the six month period ended June 30, 2014 and 2013, the Company incurred zero cost of goods sold. For the six month period ended June 30, 2014, and 2013, there was no software cost of goods sold incurred. Expense For the six month period ended June 30, 2014, the Company incurred selling, general and administrative expenses, and depreciation expense of $ 291,808. The primary expenses were professional fee of $ 41,746, rental expense of $ 46,344, office supplies of $ 23,042, meeting and conference of $ 7,581, meal and entertainment of $ 10,068, travel expense of $ 12,412, and payroll expense of $ 117,646. For the six month period ended June 30, 2013, the Company incurred selling, general and administrative expenses and depreciation expense of $ 131,557. The Company is still development stage enterprise and need to secure financing activities to survive the business. And the Company was in the progress of building up the network relations and promotion of Hyperera's name and its products. Accordingly, the Company incurred significant increase of overall selling, general and administrative expenses. 9 -------------------------------------------------------------------------------- Income Taxes There were no income taxes. Net Loss For six month period ended June 30, 2014, the Company had net loss of $ 291,232; for six month period ended June 30, 2013, the Company incurred net loss of $ 53,593. At June 30, 2014, the Company had accumulated net loss of $ 1,147,443 for cumulative period from February 19, 2008 (Date of Inception) through June 30, 2014. Commitments and Contingencies Our Company is still a development stage enterprise, and we continue to expend our efforts in our marketing to sell our software. However, we have met unanticipated significant market resistance to our software because its current technological stage of development. Further, due to most of our potential customers are state-owned hospitals, we incurred significant difficulty to go through the lengthy governmental approval process. We continue to explore methods to improve our product and remedy this situation and we believe with Hyperera (Beijing) Technology Ltd. investment of significant time and effort to secure a sales agent agreement with Caradigm, and finally securing the agreement in April 2014 as well as our activities in the quarter ended June 30, 2014 described above demonstrate how we continue to move forward to advance our business despite these difficulties. We continue to be unable to secure repayment of our significant loan to Greensaver Corporation, despite the fact another payment deadline has passed with no repayment. See discussion of "Loans to Greensaver Corporation" below for a more complete discussion of the current status of this matter. Loans to Related Party Supplier- Beijing Chaoran From October to December 2010, the Company advanced short-term loans of $995,836 as of December 31, 2011 to supplier, Beijing Chaoran. The interest rate was agreed at annual rate of 3.0%, the accrued interest receivables were $3,127. The repayment terms were upon demand as request by the Company. From January to March 31, 2011 the Company advanced additional short-term loans of $747,500 to supplier, Beijing Chaoran. The interest rate was estimated at annual rate of 3%, the accrued interest receivables were $9,273. On April 14, 2011, Beijing Chaoran repaid the loan amount of $1,538,462 to the Company; the Company signed a loan agreement with unrelated party Greensaver Corporation to advance loan amount of $1,538,462 at annual interest rate of 10%. As of December 31, 2012, the balance of loan amount to Related Party Supplier-Beijing Chaoran was $5,873, and the interest incomes from Beijng Chaoran were based on annual interest rate of 3% in year 2012. As of December 31, 2013, the balance of loan amount to Related Party Supplier-Beijing Chaoran is $135,232, and the interest incomes from Beijng Chaoran were based on annual interest rate of 3%. From January to June 30, 2014, the Company returned $ 63,154 loans to Chaoran. As of June 30, 2014, the balance of loan amount to Related Party Supplier-Beijing Chaoran is $ 72,078, and the interest incomes from Beijng Chaoran were based on annual interest rate of 3%. 10 -------------------------------------------------------------------------------- Loans to Greensaver Corporation On April 14, 2012, the Company through its subsidiary Hyperera Technology (Beijing) Co., Ltd. signed a loan agreement with unrelated party Greensaver Corporation to advance a loan amount of $1,538,462 [10,000,000 RMB] at annual interest rate of 10%. The loan agreement was amended on March 2013 as follows: The status of our relationship with Greensaver Corporation as of June 30, 2013 is as follows: (1) The loan agreement was amended and extended to December 31, 2015; (2) Because Greensaver is incapable to repay the loan, the loan amount plus interest was paid only once at January 2013 for total RMB 500,000 by Greensaver as of today. The loan agreement was amended on March 2013 to provide for a monthly payment of $80,645 starting July 1, 2013 and continuing until the loan is paid off by December 31, 2015. In December 2013, owing to suddenly monetary tightening in China, the state loan was temporarily shelved, Greensaver failed to resume production. In addition, part of the creditor sued it, resulting in funds are not in place on schedule, and Greensaver's inability to timely repay the company's debt. Based on the above situation, although we could sue for Greensaver, we prefer to receive the loan repayment without lawsuit. It has been subsequently amended as follows: Greensaver Corp. promise: Pay back ¥50,000 in the second quarter of 2014, which was not paid. Pay back ¥150,000 in the third quarter of 2014, Pay back ¥300,000 in the fourth quarter of 2014. From the beginning of 2015 to repay ¥2.5 million per quarter, by the end of 2015 to repay all principal and interest payable (calculated at an annual rate of 10%) Greensaver Corp. (Seal) [1 Chinese Yuan equals $0.16 US Dollar as of May 12, 2014.] The Company has been involved in on-going discussions concerning this matter and if the Company has signed anything binding which changes or modifies the foregoing, it will file a Form 8-K concerning such matter. However, because of the continuing difficulties in collecting on this loan, the Company asked Chinese legal counsel to furnish a legal opinion as to the status of this loan. This opinion has been filed as an exhibit to our Form 10-K for the fiscal year ended December 31, 2013 along with the Amended Greensaver Agreement. Chinese counsel consented to the opinion being attached to the Form 10-K in writing and to a discussion of the opinion and subsequent correspondence with the Company's US legal counsel. In essence, China legal counsel indicates that it is his opinion that the Amendment is valid and lawful and that the Company still has a valid claim to the principal amount of the loan. In a subsequent e-mail to US counsel, China counsel indicated: "Regarding the chance of collection for Hyperera, on the base of present conditions, it is impossible to give a accurate rate of chance of collection. But I can confirm that there is a reasonable likelihood that Hyperera will have chance to collect part or whole loan on the claim." 11 -------------------------------------------------------------------------------- Notwithstanding any of the foregoing, based upon the history of this transaction, the Company urges any investor making an investment decision in the stock of the company to exercise extreme caution if that decision is based in any in in whole or in part, no matter how small the part, on the assumption that the Company will ever collect anything on this loan. Liquidity and Capital Resources At June 30, At December 31, 2014 2013 Current Ratio 0.51 1.11 Cash $ 136,944 $ 129,009 Working Capital $ (256,357 ) $ 28,263 Total Assets $ 1,830,702 $ 1,846,336 Total Liabilities $ 524,490 $ 248,068 Total Equity $ 1,306,212 $ 1,598,268 Total Debt/Equity 0.40 0.16 *Current Ratio = Current Assets / Current Liabilities **Total Debt / Equity = Total Liabilities / Total Shareholders' Equity. ***Working Capital = Current Assets - Current Liabilities The Company had cash and cash equivalents of $ 136,944 at June 30, 2014 and the negative working capital of $ 256,357, and cash and cash equivalent of $129,009 at December 31, 2013 and the working capital of $ 28,263. The Company's related party transactions, the short-term loans to related party supplier, may raise substantial doubt about its ability to carry out its operational business plan and cause uncertainty about its cash flows, such related party borrows or withdraws may raise substantial doubt about the Company's ability to continue as going concerns. Conclusion There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations and carry out its business plan. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include adjustments that might result from the outcome of this uncertainty and if the Company is unable to generate significant revenue or secure financing, then the Company may be required to cease or curtail its operation. 12 -------------------------------------------------------------------------------- Shareholder's Equity The Company had total equity of $ 1,598,268 at June 30, 2014, and $ 1,814,836 at June 30, 2013 respectively On February 19, 2008, the Company issued 20,000,000 shares to six founders of the Company, Zhiyong Li, Wei Wu, and Huitao Zhou at $0.001 per share or $20,000 for initial capital (stock subscription receivable). On September 30, 2008, the Company issued total 5,200,000 shares to 52 shareholders at $0.03 per share or $156,000 for common stock (stock subscription receivable). On April 28, 2008, the Company issued additional 1,400,000 shares to 14 shareholders at $0.03 per share or $42,000 for common stock (stock subscription receivable). On July 20, 2008, additional 1,200,000 shares were issued to 7 shareholders at $ 0.03 per share, and the total proceeds of $36,000 were received. On July 20, 2008, 139,000 shares were issued to Williams Law Group at $ 0.03 per share for the legal service value $4,170. At December 15, 2009, additional 60,000 shares were issued to 3 shareholders, Baozhong Fu, Long Zhang, and Xuefeng Zhang, Chinese citizens, at $ 0.20 per share, and the total proceeds of $12,000 were received. On September 10, 2010, additional 2,030,000 shares were issued to 79 shareholders, Chinese citizens, at $ 0.20 per share or $ 406,000 for common stock (stock subscription receivable). On December 15, 2010, additional 5,855,000 shares were issued to 70 shareholders at $0.20 per share for $1,171,000. On December 31, 2010, additional 100,000 shares were issued to Mr. Jing Li for financial consulting services at $0.20 per share for $20,000. Therefore, as of December 31, 2010, the Company has a total of 35,984,000 shares were issued and outstanding. At January 1, 2011, 50,000 shares were issued to one shareholder at $0.20 per share for $10,000. On June 30, 2013, additional 1,660,000 shares were issued to 13 shareholders, Chinese citizens at RMB 1.40 per share, equivalent at USD $0.2153 per share for RMB 2,324,000. At May 1, 2011, 210,000 shares were issued to 8 shareholders at $0.30 per share for $63,000. At June 30, 2013, 200,000 shares were issued to one shareholder at $0.20 per share for $40,000 which was stock subscription receivable as of June 30, 2013. At July 15, 2011 100,000 shares were issued to one shareholder at $0.45 per share, total proceeds of $45,000 were received on July 2011. There was no share issued in year 2013. On July 1, 2013, additional 400,000 shares were issued to 1 shareholder, Chinese citizens, at $ 0.20 per share for $ 80,000. On August 30, 2013, additional 1,500,000 shares were issued to 2 shareholders, Chinese citizens, at $ 0.20 per share for $ 300,000. Therefore, as of June 30, 2014, the total outstanding common shares were 40,104,000. 13 -------------------------------------------------------------------------------- |