Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The
following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and
cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial
statements and the related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are
based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results
could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those
discussed below and elsewhere in this report, particularly in the sections titled “Risk Factors” and “ Special
Note Regarding Forward-Looking Statements. ”
Overview
We are an acquisition holding company focused
on locating undervalued and undercapitalized companies, primarily in the healthcare industry, and providing them capitalization and leadership
to maximize the value and potential of their private enterprises while also providing diversification and risk mitigation for our stockholders.
Specifically, we have and will continue to look at a diverse variety of acquisitions in the healthcare sector in terms of growth stages
and capital structures and we intend to focus our portfolio of subsidiaries approximately as follows: 80% will be targeted to established
profitable niche small to mid-sized healthcare companies and 20% will be targeted to second stage startups in healthcare and related financial
services (emerging businesses with a strong organic growth plan that is materially cash generative).
42
All of our operations are conducted through, and
our income derived from, our various subsidiaries. We operate the following businesses through our wholly owned subsidiaries.
· Healthcare Business . Nova, which we acquired May 31, 2021, operates a group of regional
primary specialty and ancillary care facilities throughout Florida that provide traumatic injury victims with primary care evaluations,
interventional pain management, and specialty consultation services. We focus on plaintiff related care are and a highly efficient provider
of EMC assessments. We provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and
associated bones, joints, tendons, muscles, ligaments, and nerves. From sports injuries, to sprains, strains, and fractures, our doctors
are dedicated to helping patients return to active lifestyles.
· Financial Services (Tax Resolution) Business . Platinum Tax, which we acquired on July 31,
2018, is a full-service tax resolution firm located in Los Angeles, California. Since 2011, we have been assisting all types of taxpayers
resolve any and all issues with the IRS and applicable state tax agencies. We provide fee-based tax resolution services to individuals
and companies that have federal and state tax liabilities by assisting clients to settle outstanding tax debts.
· Real Estate Business . Edge View, which we acquired on July 16, 2014, is a real estate company
that owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted; six (6) acres zoned high-density residential
(HDR) that can be platted in various configurations to meet current housing needs; and twelve (12) acres zoned in Lemhi County as
Agriculture that is available for further annexation into the City of Salmon for development, as well as a common area for landowners
to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond. Salmon is known as Idaho’s premier
whitewater destination as well as one of the easier accesses to the Frank Church Wilderness Area - the largest wilderness in the
lower 48 states. Salmon’s airport has service to Boise, Idaho and serves as a hub to access whitewater rafting start points
and wilderness landing strips. Management has invested years working to develop a new and exciting housing development in Salmon, Idaho
and plans to enter into a joint venture agreement with a developer for this planned concept development.
Impact of Coronavirus Pandemic
In December 2019, a novel coronavirus disease,
or COVID-19, was initially reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19
has had a widespread and detrimental effect on the global economy as a result of the number of cases and affected countries and actions
by public health and governmental authorities, businesses, other organizations, and individuals to address the outbreak, including travel
bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns. The
COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, and we have experienced and
expect to continue to experience unpredictable reductions in demand for certain of our services.
Due to the COVID-19 pandemic, client enrollment
at Platinum Tax has been at a slower pace than initially expected. In addition, during 2022, Platinum Tax experienced reduced enrollment
due to governmental policy. As a result, the performance of Platinum Tax was effected and the pandemic had a material adverse impact on
its market share growth plans and timelines. Additionally, in accordance with recommendations from public health officials to mitigate
the spread of COVID-19, we have during periods of 2020 temporarily closed certain operations for several months. All operations are now
open and functioning. Our results will be adversely impacted by any new closures and other actions taken to contain or treat the impact
of COVID-19, and the extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted.
Furthermore, the global deterioration in economic
conditions, which may have an adverse impact on discretionary consumer spending or investing, could also impact our business and demand
for our services. For instance, consumer spending and investing may be negatively impacted by general macroeconomic conditions, including
a rise in unemployment, and decreased consumer confidence resulting from the pandemic.
43
Our efforts to help mitigate the negative impact
of the outbreak on our business may not be effective, and we may be affected by a protracted economic downturn. Furthermore, while many
governmental authorities around the world have and continue to enact legislation to address the impact of COVID-19, including measures
intended to mitigate some of the more severe anticipated economic effects of the virus, we may not benefit from such legislation, or such
legislation may prove to be ineffective in addressing COVID-19’s impact on our and our customer’s businesses and operations.
Even after the COVID-19 outbreak has subsided, we may continue to experience impacts to our business as a result of COVID-19’s global
economic impact and any recession that has occurred or may occur in the future. Further, as the COVID-19 situation is unprecedented and
continuously evolving, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or in
a manner that we currently do not consider that may present significant risks to our operations.
The extent to which the COVID-19 pandemic may
impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus.
Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global
supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations
and cash flows. See also “ Risk Factors ” for more information.
Segments
During the years ended December 31, 2022 and 2021,
we had four reportable operating segments as determined by management using the “management approach” as defined by the authoritative
guidance on Disclosures about Segments of an Enterprise and Related Information :
(1) Affordable Housing (AHI), which was sold on October 31, 2022
(2) Financial Services (Platinum Tax)
(3) Healthcare (Nova)
(4) Real Estate (Edge View)
These segments are a result of differences in
the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general accounting,
human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue consists of
nonrecurring items.
The affordable housing segment leases and sells
mobile homes as an option for a homeowner wishing to avoid large down payments, expensive maintenance costs, large monthly mortgage payments
and high property taxes and insurance which is a common trait of brick-and-mortar homes. Additionally, if bad credit is an issue preventing
potential home owners from purchasing a traditional house, we will provide a “lease to own” option so people secure their
family home.
The financial services segment provides tax resolution
services to individuals and companies that have federal and state tax liabilities. It collects fees based on efforts to negotiate and
assist in the settlement of outstanding tax debts.
The healthcare segment provides a full range of
diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments,
and nerves.
44
The real estate segment consists of Edge View,
which owns 30 acres of land, including 23.5 acres zoned MDR (medium density residential) with 12 lots already platted and sold and 48
lots zoned HDR (high density residential), 4 acres of dedicated river front property zoned for recreation on the Salmon River, Idaho’s
premier whitewater river, and 2.5 acres zoned for commercial use. All land is in the city limits of Salmon and adjacent to the Frank church
Wilderness Park (the largest wilderness park in the lower 48 states).
Management uses numerous tools and methods to
evaluate and measure of its subsidiaries success. To help succeed, management retains the prior owners of the subsidiaries and allow them
to do what they do best is run the business. Additionally, management monitors key metrics primarily revenues and net income from operations.
Discontinued Operations
Red Rock
On May 1, 2018, we entered into a stock for stock
purchase agreement with the sellers of Red Rock Travel, LLC, or Red Rock, and a related management agreement to manage Red Rock. The terms
and conditions of those agreements were subsequently violated causing the transaction to be reversed and dissolved on May 31, 2019. Red
Rock reverted to its previous ownership, we canceled the shares of series K preferred stock related to the aborted acquisition and
we filed notice with the State of Florida of the dissolution.
On April 26, 2021, we filed a lawsuit against
investors in Red Rock seeking a judgement declaring that convertible secured notes issued to them by Red Rock purportedly convertible
into our common stock to be null and void, and defendants subsequently filed a counterclaim. On July 29, 2022, the parties entered into
a mediated settlement agreement whereby defendants agreed to dismiss all claims against our company related to the notes and accrued interest
in the amount of $510,418 and further agreed to cancel and return common stock and warrants issued to claimants in a related 2020 settlement.
We agreed to issue defendants 592,000,000 shares of common stock. As a result of the settlement agreement, the convertible notes and accrued
interest were written-off in the third quarter of 2022 resulting in a gain of $510,417, which is recorded in discontinued operations.
As of December 31, 2022, in a separate settlement an additional 66,666,666 shares were added to the settlement for a total of 658,666,666
shares issued and recorded in common stock for $658,666, additional paid in capital for $(409,775). The settlement also required the previous owners to relinquish 35,000,000 shares of common stock.
Prior to the settlement, we continued to
carry Red Rock liabilities on our balance sheet including accounts payables and accrued expenses of $1,872,086, convertible notes
payable of $240,000, accrued interest of $214,318 and a derivative liability of $378,877 as of September 30, 2021. The
party responsible for the convertible notes and related accrued interest is in dispute and is currently in litigation. The
derivative liability is a function of the convertible notes and accrued interest and the accounts payable and accrued expenses of
$1,872,086 is deemed to be the responsibility of the current owners of Red Rock and was written-off by us in the third quarter of
2021 resulting in a gain of $328,718, which is recorded in discontinued operations.
45
Results of Operations
Comparison of Years Ended December 31, 2022
and 2021
The following table sets forth key components
of our results of operations during the years ended December 31, 2022 and 2021, both in dollars and as a percentage of our revenue.
December 31, 2022
December 31, 2021
(Restated)
Amount
% of
Revenue
Amount
% of
Revenue
Revenue
Financial services
$ 1,305,077
10.88%
$ 4,313,167
43.66%
Healthcare
10,693,196
89.12%
5,413,890
54.80%
Real estate
–
–
152,000
1.54%
Total revenue
11,998,273
100.00%
9,879,057
100.00%
Cost of sales
Financial services
397,347
3.31%
1,942,411
19.66%
Healthcare
4,060,034
33.84%
1,746,561
17.68%
Real estate
–
–
79,481
0.80%
Total cost of sales
4,457,381
37.15%
3,768,453
38.15%
Gross profit
7,540,892
62.85%
6,110,604
61.85%
Operating expenses
Depreciation expense
23,132
0.19%
13,886
0.14%
Goodwill impairment
2,092,048
17.44%
–
–
Selling, general and administrative
3,733,728
31.12%
4,434,594
44.89%
Total operating expenses
5,848,908
48.75%
4,448,480
45.03%
Income from operations
1,691,984
14.10%
1,662,124
16.82%
Other income (expense)
Other income
150,256
1.25%
32,629
0.33%
Gain on divestiture
–
–
788,500
7.98%
Gain on debt refinance and forgiveness
1,397,271
11.65%
–
–
Gain on change of estimate
–
–
184,243
1.86%
Penalties and fees
(2,063,916 )
(17.20 )%
–
–
Interest expense
(6,392,242 )
(53.28 )%
(1,906,844 )
(19.30 )%
Conversion cost penalty and reimbursement
–
–
(13,000 )
(0.13 )%
Amortization of debt discounts
(253,823 )
(2.12 )%
(1,051,264 )
(10.64 )%
Total other income (expense)
(7,162,454 )
(59.70 )%
(1,965,736 )
(19.90 )%
Net loss before discontinued operations
(5,470,470 )
(45.59 )%
(303,612 )
(3.07 )%
Gain from discontinued operations
40,949
0.34%
2,171,076
21.98%
Loss from disposal of discontinued operations
–
–
(1,201,171 )
(12.16 )%
Net income (loss)
$ (5,429,521 )
(45.25 )%
$ 666,905
(6.74 )%
46
Revenue . Our total revenue increased
by $2,119.216, or 21.45%, to $11,998,273 for the year ended December 31, 2022 from $9,879,057 for the year ended December 31, 2021. Such
increase was primarily due to the increase in revenue from the healthcare segment due to the acquisition of Nova in May 2021 and a slight
increase in revenue from the affordable housing segment, offset by decreases in revenue from the financial services segment and real estate
segment.
The financial services segment generates revenue
through the provision of tax resolution services to individuals and business owners. Revenue from the financial services segment decreased
by $3,008,090, or 69.74%, to $1,305,077 for the year ended December 31, 2022 from $4,313,167 for the year ended December 31, 2021. Such
decrease was primarily due to the loss of leads from Optima Tax Relief which affected the significant revenue reduction in the tax resolution
business.
The healthcare segment generates revenue through
a full range of diagnostic and surgical services. Revenue from the healthcare services segment increased by $5,279,306, or 97.51%, to
$10,693,196 for the year ended December 31, 2022 from $5,413,890 for the period of May 31, 2021 (date of acquisition) to December 31,
2021.
The real estate segment generates revenue through
the sale of parcels of land. Revenue from the real estate segment decreased by $152,000, or 100%, to $0 for the year ended December 31,
2022 from $152,000 for the year ended December 31, 2021. Such decrease was primarily due to the sale of three parcels of land in 2021.
Cost of sales . Our total cost of sales
increased by $688,928, or 18.28%, to $4,457,381 for the year ended December 31, 2022 from $3,768,453 for the year ended December 31, 2021.
Such increase was primarily due an increase from the healthcare segment due to the acquisition of Nova in May 2021, offset by decreases
from the other segments. As a percentage of revenue, our total cost of sales was 37.15% and 38.15% for the years ended December 31, 2022
and 2021, respectively.
Cost of sales for the financial services segment consists
of advertising, contract labor and merchant fees. Cost of sales for the financial services segment decreased by $1,545,064, or 79.54%,
to $397,347 for the year ended December 31, 2022 from $1,942,411 for the year ended December 31, 2021. Such decrease was generally in
line with the decrease in revenue from this segment.
Cost of sales for the healthcare segment consists
of surgical center fees, physician and professional fees, salaries and wages and medical supplies. Cost of sales from the healthcare services
segment increased by $2,313,473, or 132.46%, for the year ended December 31, 2022 from $1,746,561 for the period from May 31, 2021 (date
of acquisition) to December 31, 2021.
Cost of sales for the real estate segment was
$0 for the year ended December 31, 2022, as compared to $79,481 the year ended December 31, 2021, which consisted of costs related to
the sale of the three parcels of land by Edge View.
Gross profit . As a result of the foregoing,
our total gross profit increased by $1,430,288, or 23.41%, to $7,540,892 for the year ended December 31, 2022 from $6,110,604 for the
year ended December 31, 2021. Our total gross margin (percent of revenue) increased from 61.85% for the year ended December 31, 2021 to
62.85% for the year ended December 31, 2022.
47
Gross profit for the financial services segment
decreased by $1,463,026, or 61.71%, to $907,730 for the year ended December 31, 2022 from $2,370,756 for the year ended December 31, 2021.
Gross margin (percent of revenue) for the financial services segment increased from 54.97% for the year ended December 31, 2021 to 69.55%
for the year ended December 31, 2022.
Gross profit for the healthcare services segment
was $6,633,162 for the year ended December 31, 2022, as compared to $3,667,329 for the period from May 31, 2021 (date of acquisition)
to December 31, 2021. Gross margin (percent of revenue) for the healthcare segment was 62.03% and 67.74% for the year ended December 31,
2022 and for the period from May 31, 2021 (date of acquisition) to December 31, 2021, respectively.
Gross profit for the real estate segment was $72,519
for the year ended December 31, 2021 and gross margin (percent of revenue) was 47.71%.
Depreciation expense . Our depreciation
expense was $23,132, or 0.19% of revenue, for the year ended December 31, 2022, as compared to $13,886, or 0.14% of revenue, for the
year ended December 31, 2021.
Goodwill impairment . We performed
the goodwill impairment test of the underlying assets, expected cash flows, decreased asset value and other factors. As a result, we
recognized a goodwill impairment in the amount of $2,092,048 and $0 for the years ended December 31, 2022 and 2021, respectively.
Selling,
general and administrative expenses . Our selling, general and administrative expenses consist primarily of accounting, auditing,
legal and public reporting expenses, personnel expenses, including employee salaries and bonuses plus related payroll taxes, advertising
expenses, professional advisor fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations.
Our selling, general and administrative expenses decreased by $700,866, or 15.80%, to $3,733,728 for the year ended December 31, 2022
from $4,434,594 for the year ended December 31, 2021. As a percentage of revenue, our selling, general and administrative expenses were
31.12% and 44.89% for the years ended December 31, 2022 and 2021, respectively. Such decrease was primarily due to the decline in our
financial services business.
Total other income (expense) . We had
$7,162,454 in total other expense, net, for the year ended December 31, 2022, as compared to other expense, net, of $1,965,736 for the
year ended December 31, 2021. Other expense, net, for the year ended December 31, 2022 consisted of interest expense of $6,392,242, financing
penalties and fees of $2,063,916, and amortization of debt discounts of $253,823, offset by a gain on forgiveness of debt of $1,397,271
and other income of $150,256. Other expense, net, for the year ended December 31, 2021 consisted of interest expense of $1,906,844, amortization
of debt discounts of $1,051,264 and a conversion cost penalty and reimbursement of $13,000, offset by a gain on divestiture of $788,500
related to Key Tax, a gain on change of estimate of $170,964 related to a change in income tax provision and other income of $32,629,
which consisted primarily of a gain from conversion of debt to preferred stock.
Discontinued operations . For
the year ended December 31, 2022, we recorded a gain from discontinued operations of $40,949 and a loss from disposal of discontinued
operations of $0. For the year ended December 31, 2021, we recorded a gain from discontinued operations of $2,171,076 and a loss from
disposal of discontinued operations of $1,201,171.
Net income (loss) . As a result of the
cumulative effect of the factors described above, our net loss was $5,429,521 for the year ended December 31, 2022, as compared to net
income of $666,293 for the year ended December 31, 2021, an decrease of $6,095,814, or 914.9%.
48
Liquidity and Capital Resources
As of December 31, 2022, we
had $ 226,802 in cash . To date, we have financed our operations primarily through
revenue generated from operations, sales of securities, advances from stockholders
and third-party and related party debt .
We believe, based on our operating plan, that current working capital and current
and expected additional financing should be sufficient to fund operations and satisfy our obligations as they come due for at least one
year from the financial statement issuance date. However, additional funds from new financing and/or
future equity raises are required for continued operations and to execute our business plan and our strategy of acquiring additional
businesses. The funds required to sustain operations ranges between $600,000 to $1 million and additional funds execute our business
plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable
in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of
a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries.
Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming
target company sellers accept a significant portion of the purchase price in the form of seller notes or our equity or equity in one
of our subsidiaries) ranges between $5 million to $7 million. If, and to the extent, that sellers are unwilling to accept a significant
portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $10
million.
We intend to raise capital for additional acquisitions primarily through equity and debt financings.
The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in
increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations.
Financing may not be available in amounts or on terms acceptable to us, if at all. There is no guarantee that we will be able to acquire
additional businesses under the terms outlined above.
Summary of Cash Flow
The following table provides detailed information
about our net cash flow for all financial statement periods presented in this prospectus.
Years Ended December 31,
2022
2021
Net cash used in operating activities
$ (1,100,327 )
$ (850,141 )
Net cash from discontinued operations
(42,633 )
(201,208 )
Net cash used in investing activities
–
(2,323,642 )
Net cash provided by financing activities
788,794
3,676,648
Net change in cash
(354,166 )
301,657
Cash and cash equivalents at beginning of year
580,968
279,311
Cash and cash equivalents at end of year
$ 226,802
$ 580,968
Our net cash used in operating activities from continuing
operations was $1,100,327 for the year ended December 31, 2022, as compared to $850,141 for the year ended December 31, 2021. For the
year ended December 31, 2022, our net loss of $5,429,521, a gain on refinance of debt of $1,397,271, offset by a loss on finance penalties
and fees of $2,063,916, impairment of goodwill of $2,092,048 and an increase in accrued officers’ compensation of $873,506, were
the primary drivers for the cash used in operations. For the year ended December 31, 2021, our net income of $666,293 an decrease in accounts
receivable of $2,157,880 and a gain on forgiveness of debt of $739,450, offset by amortization of loan discount of $1,051,264 and an increase
in accrued officers’ compensation of $764,835, were the primary drivers for the cash used in operations.
We had no investing activities for the year ended
December 31, 2022. For the year ended December 31, 2021, our net cash used in investing activities was $2,323,642, which consisted of
cash used for the acquisition of Nova of $2,320,235 and purchases of furniture and equipment of $3,407.
49
Our net cash provided by financing activities
was $788,794 for the year ended December 31, 2022, as compared to $3,676,648 for the year ended December 31, 2021. Net cash provided by
operating activities for the year ended December 31, 2022 consisted of proceeds from convertible notes payable of $879,083, proceeds from
share issuance of $25,000, dividend payout of $102,740, repayment of convertible notes payable of $5,908, repayments of related party
notes payable of $3,068, and repayments to directors and officers of $3,573. Net cash provided by financing activities for the year ended
December 31, 2021 consisted of proceeds from the issuance of series N preferred stock of $3,000,000, proceeds from paycheck protection
program and small business administration loans of $547,050, and proceeds from convertible notes payable of $444,500, offset by preferred
stock dividends of $203,880, repayment of line of credit of $51,927, repayment of convertible notes payable of $30,777 and payment of
notes payable of $28,318.
Convertible Notes
As of December 31, 2022, we had convertible debt
outstanding net of amortized debt discount of $3,515,752. During the year ending December 31, 2022, we received proceeds of $1,490,706
from convertible notes and repaid $5,908.
The following is a schedule of convertible notes
payable outstanding as of December 31, 2022:
Note #
Issuance
Date
Maturity
Date
Principal
Balance
Accrued
Interest
Unamortized Debt
Discount
7-1
10/28/2016
10/28/2017
$ 10,000
$ 2,263
$ –
9
09/12/2016
09/12/2017
50,080
14,157
–
10
01/24/2017
01/24/2018
55,000
69,876
–
29-2
11/08/2019
11/08/2021
36,604
20,160
–
31
08/28/2019
08/28/2021
–
8,385
–
37-1
09/03/2020
06/30/2021
113,666
28,756
–
37-2
11/02/2020
08/31/2021
113,167
27,510
–
37-3
12/29/2020
09/30/2021
113,167
26,474
–
38
02/09/2021
02/09/2022
96,000
27,939
–
39
04/26/2021
04/26/2022
168,866
39,684
–
40-1
09/22/2022
09/22/2023
2,600,000
71,233
–
40-2
11/04/2022
11/04/2023
68,666
1,072
14,486
40-3
11/28/2022
11/28/2023
68,667
620
15,615
40-4
12/21/2022
12/21/2023
68,667
187
16,697
$ 3,562,550
$ 338,316
$ 46,798
Note 7-1 . On October 28, 2016, we issued
a convertible promissory note in the principal amount of $50,000, which matured on October 28, 2017. Note 7-1 is currently in default
and accrues at a default interest rate of 20% per annum.
Note 9 . On September 12, 2016, we issued
a convertible promissory note in the principal of $80,000 for services rendered, which matured on September 12, 2017. Note 9 is currently
in default and accrues at a default interest rate of 20% per annum.
Note 10 . On January 24, 2017, we issued
a convertible promissory note in the principal of $80,000 for services rendered, which matured on January 24, 2018. Note 10 is currently
in default and accrues at a default interest rate of 20% per annum.
Note 26 . On August 10, 2017, we issued
a convertible promissory note in the principal amount of $20,000, which matured on January 27, 2018. Note 26 is currently in default and
accrues interest at a default interest rate of 15% per annum.
50
Note 29-1 and 29-2 . On May 10, 2019, we
issued a convertible promissory note in the principal amount of $150,000. On November 8, 2019, this note (Note 29) was purchased by and
assigned to an unrelated party. The amount assigned was the existing principal amount of $150,000 and accrued interest of $5,918, which
was issued as Note 29-1, plus a new convertible promissory note in the principal amount of $62,367, which was issued as Note 29-2. Notes
29-1 and 29-2 are currently in default and accrue interest at a default interest rate of 24% per annum.
Note 31 . On August 28, 2019, we issued a convertible promissory
note in the principal amount of $120,000, which matured on August 28, 2020. The note is currently in default and accrue interest at a
default interest rate of 24% per annum.
Notes 37-1, 37-2 and 37-3 . On September
3, 2020, we issued a convertible promissory note in the principal amount $200,000, with original issue discount of $50,000, which could
be drawn in several tranches. On September 3, 2020, we executed the first tranche in the principal amount of $67,000, less original issue
discount of $17,000, which matured on June 30, 2021 (Note 37-1). On November 2, 2020, we executed the second tranche in the principal
amount of $66,500, less original issue discount of $16,500, which matured on August 31, 2021 (Note 37-2). On December 29, 2020, we executed
the third tranche in the principal amount of $66,500, less original issue discount of $16,500, which matured on September 30, 2021 (Note
37-3). Notes 37-1, 37-2 and 27-3 are currently in default and accrue interest at a default interest rate of 18% per annum.
Note 38 . On February 9, 2021, we issued
a convertible promissory note in the principal amount $103,500, which matured on February 9, 2022. Note 38 is currently in default and
accrues interest at a default interest rate of 22% per annum.
Note 39 . On April 26, 2021, we issued a
convertible promissory note in the principal amount $153,500, which matured on May 10, 2022. Note 19 is currently in default and accrues
interest at a default interest rate of 22% per annum.
Note 40-1, 40-2, 40-3 and 40-4 . On September
22, 2022, we issued a convertible promissory note in the principal amount of $2,600,000 in exchange for total of $4,791,099 of defaulted
promissory notes balances (Note 40-1). On November 4, 2022, we executed a second tranche under this note principal amount of $68,667,
less original issue discount and fee of $18,667 (Note 40-2). On November 28, 2022, we executed the third tranche under this note in the
principal amount of $68,667, less original issue discount and fee of $18,667 (Note 40-3). On November 28, 2022, we executed a fourth tranche
under this note in the principal amount of $68,667, less original issue discount and fee of $18,667 (Note 40-4). Notes 40-1, 40-2, 40-3
and 40-4 mature on the first anniversary of issuance and accrued interest at a rate of 10% per annum.
Small Business Administration Loans
On June 2, 2020, we obtained a loan from the Small
Business Administration of $150,000 at an interest rate of 3.75% with a maturity date of June 2, 2050. The principal balance and accrued
interest at December 31, 2022 was $144,609 and $5,723, respectively.
Debenture
On March 12, 2009, we entered into a preferred
debenture agreement for $20,000. The debenture bears interest at 12% per year and matured on September 12, 2009. As of December 31, 2022,
the balance of the debenture was $10,989 and it had interest of $6,229.
Related Party Loans
From time to time, the previous owner and current
manager of Platinum Tax loaned funds to Platinum Tax to cover short term operating needs. The amount owed as of December 31, 2022 was
$37,025.
As of December 31, 2022, the amounts due from
the previous owners of Edge View is $4,979.
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Contractual Obligations
Our principal commitments consist mostly of obligations
under the loans described above and the operating leases described under Item 2 “ Properties ”.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The following discussion relates to critical accounting
policies for our consolidated company. The preparation of financial statements in conformity with United States generally accepted accounting
principles, or GAAP, 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 financial statements. These accounting policies are important for an understanding of our financial
condition and results of operation. 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 financial statements:
Revenue Recognition . On January
1, 2018, we adopted Accounting Standards Codification, or ASC, 606, Revenue from contracts with customers , using the modified retrospective
method applied to those contracts which were not completed as of January 1, 2018.
We apply the following five-step model to determine
revenue recognition:
· Identification of a contract with a customer
· Identification of the performance obligations in the contact
· Determination of the transaction price
· Allocation of the transaction price to the separate performance allocation
· Recognition of revenue when performance obligations are satisfied
We only apply the five-step model when it is probable
that we will collect the consideration we are entitled to in exchange for the goods or services transferred to the customer.
At contract inception and once the contract is determined to be within the scope of ASC 606, we assess services promised within each contract
and determine those that are performance obligations and assesses whether each promised service is distinct.
Our financial services segment reports revenues
as services are performed and our healthcare segment reports revenues at the time control of the services transfer to the customer and
from providing licensed and/or certified orthopedic procedures. Nova does not have contract liabilities or deferred revenue as there are
no amounts prepaid for services.
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Healthcare Income
Established billing rates are not the same as
actual amounts recovered for Nova. They generally do not reflect what Nova is ultimately paid and therefore are not reported
in our consolidated financial statements. We are typically paid amounts based on established charges per procedure with guidance
from the annually updated Current Procedural Terminology, or CPT, guidelines (a code set maintained by the American Medical Association
through the CPT Editorial Panel), that designates relative value units and a suggested range of charges for each procedure which is then
assigned a CPT code. This fee is discounted to reflect the percentage paid to us “using a modifier” recognized by each insurance
carrier for services, less deductible, co-pay, and contractual adjustments which are deducted from the calculated fee. The
net revenue is recorded at the time the services are rendered.
Contract Fees (Non-PIP)
We have contract fees for amounts earned from
our non- personal injury protection, or PIP, related procedures, typically car accidents, and are collected on a contingency basis. These
cases are sold to a factor, who bears the risk of economic benefit or loss. After selling patient cases to the factor, any additional
funds collected by us are remitted to the factor.
Service Fees – Net (PIP)
We generate services fees from performing various
procedures on the date the services are performed. These services primarily include slip and falls as well as smaller nominal non-PIP
services. Fees are collected primarily from third party insurance providers. These revenues are based on established insurance billing
rates less allowances for contractual adjustments and uncollectible amounts. These contractual adjustments vary by insurance company and
self-pay patients. We compute these contractual adjustments and collection allowances based on our historical collection experience.
Completing the paperwork for each case and preparing
it for billing takes approximately ten business days after a procedure is performed. The majority of claims are then filed electronically
except for those remaining insurance carriers requiring paper filing. An initial response is usually received within four weeks from electronic
filing and up to nine weeks from paper filing. Responses may be a payment, a denial, or a request for additional information.
Historical collection rates are estimated using the
most current prior 12-month historical payment and collection percentages. The Company generally receives all of its collections within
12 months from the date of service. Historically the Company receives 49.9% of collections billed and these net collection receipts represent
revenue. The Company recognizes the remaining 51.1% of uncollectible portions as finance charges as other expenses on the Consolidated
Statement of Operations. The Company accounts for chargebacks as they occur and records an estimate for expected chargebacks as they are
received from insurance companies.
For the years ended December 31, 2022 and 2021,
we recorded $0 bad debt expense. Additionally, we have not recorded any estimate for expected chargebacks.
Our contracts for both our contract and service
fees each contain a single performance obligation (providing orthopedic services), as the promise to transfer the individual services
is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction
price is allocated to this single performance obligation. Accordingly, we recognize revenues (net) when the patient receives orthopedic
care services. Our patient service contracts generally have performance obligations which are satisfied at a point in time. The performance
obligation is for onsite or off-site care provided. Patient service contracts are generally fixed-price, and the transaction price is
in the contract. Revenue is recognized when obligations under the terms of the contract with our patients are satisfied; generally, at
the time of patient care.
Financial Services Income
We generate revenue from providing tax resolution
services to individuals and business owners that have federal and state tax liabilities by assisting clients to settle outstanding tax
debts. Additionally, services include back taxes, offer in compromise, audit representation, amending tax returns, tax preparation, wage
garnishment relief, removal of bank levies and liens, and other financial challenges. We recognize revenues for these services as services
are performed.
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Rental Income
Our rent revenue is derived from the mobile home
leases. The expired leases are considered month-to-month leases. In accordance with section ASC 842, the cost of property held for leasing
by major classes of property according to nature or function, and the amount of accumulated depreciation in total, is presented in our
consolidated balance sheets. There are no contingent rentals included in income. With the exception of the month-to-month leases, revenue
was recognized on a straight-line basis and amortized into income on a monthly basis, over the lease term.
Property and Equipment . Property
and equipment are carried at cost. Expenditures for renewals and betterments that extend the useful lives of property, equipment or leasehold
improvements are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is calculated
using the straight-line method for financial reporting purposes based on the following estimated useful lives:
Classification
Useful Life
Equipment, furniture, and fixtures
5 - 7 years
Medical equipment
10 years
Leasehold improvements
10 years or lease term, if shorter
Goodwill and Other Intangible Assets .
Goodwill and indefinite-lived brands are not amortized but are evaluated for impairment annually or when indicators of a potential impairment
are present. Our impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangibles. The
annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions
and internal projections of expected future cash flows and operating plans. We believe such assumptions are also comparable to those that
would be used by other marketplace participants. During the years ended December 31, 2022 and 2021, the Company recognized goodwill impairment
in the amount of $2,092,048 and $0, respectively. The Company based this decision on impairment testing of the underlying assets, expected
cash flows, decreased asset value and other factors.
Valuation of Long-Lived Assets .
In accordance with the provisions of ASC Topic 360-10-5, Impairment or Disposal of Long-Lived Assets , all long-lived assets such
as plant and equipment and construction in progress held and used by our company are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is
evaluated by a comparison of the carrying amount of assets to estimated discounted net cash flows expected to be generated by the assets.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts
of the assets exceed the fair value of the assets.
Distinguishing Liabilities from Equity. The
Company accounts for its series N senior convertible preferred stock subject to possible redemption in accordance with ASC 480, “Distinguishing
Liabilities from Equity”. Conditionally redeemable preferred shares are classified as temporary mezzanine equity within the Company’s
consolidated balance sheet.
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Fair Value Measurements . Fair value
is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized
based upon the level of judgment associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes between
(1) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s
own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable
inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the
fair value hierarchy are described below:
Level 1
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2
Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3
Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.
Stock-Based Compensation . We account
for our stock-based compensation in which we obtain employee services in share-based payment transactions under the recognition and measurement
principles of the fair value recognition provisions of section 718-10-30 of the FASB ASC, pursuant to which all transactions in which
goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date
used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the
date on which it is probable that performance will occur. Generally, all forms of share-based payments, including stock option grants,
warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based
on estimated number of awards that are ultimately expected to vest. The expense resulting from share-based payments is recorded in general
and administrative expense in our consolidated statements of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The full text of our audited consolidated financial statements begins
on page F-1 of this annual report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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