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).
All of our operations are conducted through, and
our income derived from, our various subsidiaries. As of December 31, 2023, 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.
· 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. 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.
35
Segments
As of December 31, 2023, we had two 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) Healthcare (Nova)
(2) 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 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.
The real estate segment consists of Edge View,
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.
Management uses numerous tools and methods to
evaluate and measure our subsidiaries’ success. To help succeed, management retains the prior owners of the subsidiaries and allows
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
On November 10, 2023, we sold Platinum Tax, which
was a full-service tax resolution firm located in Los Angeles, California. Through this subsidiary we provided fee-based tax resolution
services to individuals and companies that have federal and state tax liabilities by assisting clients to settle outstanding tax debts.
As part of the asset purchase agreement between us and the purchaser, the assets that were purchased included substantially all assets,
rights, interests, and licenses, except for bank accounts in place prior to the sale, for the purchase consideration of 15% of cash collected
by the purchaser within one year following the sale date.
We and the managers of AHI entered into a resignation,
release and buyback agreement and addendum, effective October 31, 2022, pursuant to which the managers purchased AHI in exchange for returning
175,045 shares of series F preferred stock. There was a loss on disposal in the amount of $217,769 on October 31, 2022, which represented
net assets and liabilities at the time of sale back.
36
Results of Operations
Comparison of Years Ended December 31, 2023
and 2022
The following table sets forth key components
of our results of operations during the years ended December 31, 2023 and 2022, both in dollars and as a percentage of our revenue.
December 31, 2023
December 31, 2022
Amount
% of
Revenue
Amount
% of
Revenue
Total revenue
$ 11,853,266
100.00%
$ 10,693,196
100.00%
Total cost of sales
3,560,624
30.04%
4,060,034
37.97%
Gross profit
8,292,642
69.96%
6,633,162
62.03%
Operating expenses
Depreciation expense
20,777
0.18%
23,132
0.22%
Selling, general and administrative
3,076,820
25.96%
2,703,141
25.28%
Total operating expenses
3,097,597
26.13%
2,726,273
25.50%
Income from continuing operations
5,195,045
43.83%
3,906,889
36.54%
Other income (expense)
Other income (expense)
(49,795 )
(0.42)%
150,250
1.41%
Gain on debt refinance and forgiveness
115,448
0.97%
1,397,271
13.07%
Penalties and fees
(53,000 )
(0.45)%
(2,063,916 )
(19.30)%
Interest expense
(1,956,266 )
(16.50)%
(6,387,309 )
(59.73)%
Amortization of debt discounts
(136,518 )
(1.15)%
(253,823 )
(2.37)%
Total other income expense
(2,080,131 )
(17.55)%
(7,157,527 )
(66.94)%
Net income (loss) before discontinued operations
3,114,914
26.28%
(3,250,638 )
(30.40)%
Loss from discontinued operations
–
–
(2,178,883 )
(20.38)%
Loss from disposal of discontinued operations
(86,520 )
(0.73)%
–
–
Net income (loss)
$ 3,028,394
25.55%
$ (5,429,521 )
(50.78)%
Revenue . For the years ended December
31, 2023 and 2022, all of our revenue was generated by our healthcare segment, which generates revenue through a full range of diagnostic
and surgical services. Our total revenue increased by $1,160,070, or 10.85%, to $11,853,266 for the year ended December 31, 2023 from
$10,693,196 for the year ended December 31, 2022. Such increase was primarily due to increased Personal
Injury Protection (PIP) services and the opening of a facility in the Healthcare segment .
Cost of sales . Consists of surgical
center and laboratory fees, physician and professional fees, salaries and wages and medical supplies. Our total cost of sales decreased
by $499,410, or 12.30%, to $3,560,624 for the year ended December 31, 2023 from $4,060,034 for the year ended December 31, 2022. Such
decrease was primarily due to a decrease in surgical contracted services and laboratory fees .
Gross profit . As a result of the
foregoing, our total gross profit increased by $1,659,480, or 25.02%, to $8,292,642 for the year ended December 31, 2023 from $6,633,162
for the year ended December 31, 2022. Our total gross margin (percent of revenue) increased from 62.03% for the year ended December 31,
2022 to 69.96% for the year ended December 31, 2023.
37
Depreciation expense . Our depreciation
expense was $20,777, or 0.18% of revenue, for the year ended December 31, 2023, as compared to $23,132, or 0.22% of revenue, for the year
ended December 31, 2022. The decrease in depreciation expense was due to certain assets becoming fully depreciated during the years ended
December 31, 2023 and 2022.
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
increased by $373,679, or 13.82%, to $3,076,820 for the year ended December 31, 2023 from $2,703,141 for the year ended December 31, 2022.
As a percentage of revenue, our selling, general and administrative expenses were 25.96% and 25.28% for the years ended December 31, 2023
and 2022, respectively. Increases were attributable to credit losses of $132,281, professional fees of $167,155, and management bonus
of $100,000.
Total other expense . We had $2,080,131
in total other expense, net, for the year ended December 31, 2023, as compared to other expense, net, of $7,157,527 for the year ended
December 31, 2022. Other expense, net, for the year ended December 31, 2023 consisted of interest expense of $1,956,266, amortization
of debt discounts of $136,518, financing penalties and fees of $53,000 and other expense of $49,795, offset by a gain on debt refinance
and forgiveness of $115,448. Other expense, net, for the year ended December 31, 2022 consisted of interest expense of $6,387,309, 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 $150,250.
Discontinued operations . For
the year ended December 31, 2023, we recorded a loss from disposal of discontinued operations of $86,520. For the year ended December
31, 2022, we recorded a loss from discontinued operations of $2,178,883.
Net income (loss) . As a result of
the cumulative effect of the factors described above, our net income was $3,028,394 for the year ended December 31, 2023, as compared
to a net loss of $5,429,521 for the year ended December 31, 2022, a net increase of $8,457,915, or 155.78%.
Liquidity and Capital Resources
As of December 31, 2023, we
had $866,943 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 $4 million to $8 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.
38
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.
The financial statements were prepared on a going
concern basis and do not include any adjustment with respect to these uncertainties.
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,
2023
2022
Net cash used in operating activities from continuing operations
$ (1,807,987 )
$ (1,099,461 )
Net cash provided by financing activities
2,369,325
788,794
Net change in cash
647,858
(361,883 )
Cash and cash equivalents at beginning of year
219,085
580,968
Cash and cash equivalents at end of year
$ 866,943
$ 219,085
Our net cash used in operating activities from
continuing operations was $1,807,987 for the year ended December 31, 2023, as compared to $1,099,461 for the year ended December 31, 2022.
For the year ended December 31, 2023, our net income of $3,028,394, an increase in accrued officers’ compensation of $982,500, an
increase in accrued interest of $486,165, and an increase in accounts payable and accrued expense of $341,261, offset by an increase in
account receivable of $6,701,334, were the primary drivers of our net cash used in operating activities. For the year ended December 31,
2022, our net loss of $5,429,521 and a gain on refinance of debt of $1,397,271, offset by goodwill impairment of $2,092,048, a loss on
finance penalties and fees of $2,063,916 and an increase in accrued officers’ compensation of $873,506, were the primary drivers
for the cash used in operations.
We had no investing activities for the years ended
December 31, 2023 and 2022.
Our net cash provided by financing activities
was $2,369,325 for the year ended December 31, 2023, as compared to $788,794 for the year ended December 31, 2022. Net cash provided by
financing activities for the year ended December 31, 2023 consisted of net proceeds from the line of credit of $2,164,338 and proceeds
from convertible notes payable of $421,375, offset by repayment of convertible notes payable of $175,000, repayment of line of credit
of $39,293 and repayments to directors and officers of $2,195. Net cash provided by financing activities for the year ended December 31,
2022 consisted of proceeds from convertible notes payable of $879,083 and proceeds from preferred stock issuances of $25,000, offset by
dividends on preferred stock of $102,740, repayment of convertible notes payable of $5,908, repayments to directors and officers of $3,573
and repayment of the SBA loan described below of $3,068.
Convertible Notes
As of December 31, 2023, we had convertible debt
outstanding net of amortized debt discount of $3,807,030. During the year ending December 31, 2023, we received net proceeds of $421,375
from convertible notes, repaid $175,000 and wrote off $12,406 to convertible noteholders.
39
The following is a schedule of convertible notes
payable outstanding as of December 31, 2023:
Note #
Issuance
Date
Maturity
Date
Principal
Balance
Accrued
Interest
Unamortized Debt
Discount
9
09/12/2016
09/12/2017
$ 50,080
$ 5,581
$ –
10
01/24/2017
01/24/2018
55,000
80,875
–
10-1
02/10/2023
02/10/2024
50,000
6,658
–
10-2
03/30/2023
03/30/2024
25,000
2,836
–
10-3
08/11/2023
08/11/2024
25,000
1,469
–
29-2
11/08/2019
11/08/2020
36,604
10,109
–
31
08/28/2019
08/28/2020
–
8,385
–
37-1
09/03/2020
06/30/2021
113,667
64,929
–
37-2
11/02/2020
08/31/2021
113,167
63,594
–
37-3
12/29/2020
09/30/2021
113,166
62,558
–
40-1
09/22/2022
09/22/2024
2,600,000
252,665
–
40-2
11/04/2022
09/22/2024
68,667
7,939
–
40-3
11/28/2022
09/22/2024
68,667
7,506
–
40-4
12/21/2022
09/22/2024
68,667
7,054
–
40-5
01/24/2023
09/22/2024
90,166
8,284
–
40-6
03/21/2023
03/21/2024
139,166
10,671
–
40-7
06/05/2023
06/05/2024
139,166
7,826
15,671
40-8
06/13/2023
06/13/2024
21,167
1,127
2,321
40-9
07/19/2023
07/19/2024
35,500
1,605
4,863
40-10
07/24/2023
07/24/2024
14,000
614
1,965
41
08/25/2023
08/25/2024
5,000
175
–
$ 3,831,850
$ 612,460
$ 24,820
Note 9 . On September 12, 2016, we issued
a convertible promissory note in the principal amount 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, 10-1, 10-2 and 10-3 . On January
24, 2017, we issued a convertible promissory note in the principal amount of $80,000 for services rendered, which matured on January 24,
2018. Note 10 is currently in default and accrues interest at a default interest rate of 20% per annum. On February 10, 2023, we executed
a second tranche under this note in the principal amount of $50,000 (Note 10-1). On March 30, 2023, we executed a third tranche under
this note in the principal amount of $25,000 (Note 10-2). On August 11, 2023, we executed a fourth tranche under this note in the principal
amount of $25,000 (Note 10-3). Notes 10-1, 10-2 and 10-3 accrue interest at a rate of 15% per annum.
Note 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. Note 29-2 is currently
in default and accrues interest at a default interest rate of 24% per annum.
40
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 accrues interest at a default interest rate of 24% per annum. There was no outstanding principal balance as of December 31, 2023.
Notes 37-1, 37-2 and 37-3 . On September
3, 2020, we issued a convertible promissory note in the principal amount of $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.
Notes 40-1, 40-2, 40-3, 40-4, 40-5, 40-6, 40-7,
40-8, 40-9 and 40-10. 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 in the principal amount of $68,667, less an 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 an original issue discount and fee of $18,667 (Note 40-3).
On December 21, 2022, we executed a fourth tranche under this note in the principal amount of $68,667, less an original issue discount
and fee of $18,667 (Note 40-4). On January 24, 2023, we executed a fifth tranche under this note in the principal amount of $90,166, less
an original issue discount and fee of $25,166 (Note 40-5). On March 21, 2023, we executed a sixth tranche under this note in the principal
amount of $136,666, less an original issue discount and fee of $39,166 (Note 40-6). On June 5, 2023, we executed a seventh tranche under
this note in the principal amount of $136,667, less original issue discount and fee of $39,167 (Note 40-7). On June 13, 2023, we executed
an eighth tranche under this note in the principal amount of $21,167, less original issue discount and fee of $5,167 (Note 40-8). On July
19, 2023, we executed a ninth tranche under this note in the principal amount of $35,500, less an original issue discount and fee of $8,875
(Note 40-9). On July 24, 2023, we executed a tenth tranche under this note in the principal amount of $14,000, less an original issue
discount and fee of $3,500 (Note 40-10). On December 1, 2023, we executed amendment on Notes series 40 consolidated senior secured convertible
promissory note to extend the expired tranche note 40-1 through 40-5 due date to September 20, 2024. All of the Note 40 tranches mature
in one year from the note issuance date and accrue interest at a rate of 10% per annum.
Note 41. On August 25, 2023, we issued
a twelve-month convertible promissory note in the principal amount of $5,000 to our Chief Executive Officer for our operating expenses.
The rate of interest is 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, 2023 was $149,655 and $956, respectively. The principal balance and accrued interest at December 31, 2022 was
$144,609 and $5,723, respectively.
Debenture
On March 12, 2009, we issued a debenture in the
principal amount of $20,000. The debenture bore interest at 12% per year and matured on September 12, 2009. The balance of the debenture
was $10,989 at December 31, 2023 and the accrued interest was $7,547. The principal balance and accrued interest at December 31, 2022
was $10,989 and $6,229, respectively. We assigned all of our receivables from consumer activations of the rewards program as collateral
on this debenture.
41
Line of Credit
On September 29, 2023, our company and Nova entered
into a two-year revolving purchase and security agreement with DML HC Series, LLC to sell, with recourse, Nova’s accounts receivables
for a revolving financing up to a maximum advance amount of $4.5 million. As of December 31, 2023, we had $2,120,100 outstanding
balance against the revolving receivable line of credit. The revolving purchase and security agreement includes discounts recorded as
interest expense on each funding and matures on September 29, 2025.
Related Party Loans
In connection with the acquisition of Edge View
on July 16, 2014, we assumed amounts due to previous owners who are current managers of Edge View. These amounts are due on demand and
do not bear interest. The balance of these amounts are $4,979 as of December 31, 2023 and 2022.
We have obtained short-term advances from the
Chairman of the Board that are non-interest bearing and due on demand. As of December 31, 2023 and 2022, we owed the Chairman $120,997
and $123,192, respectively.
Contractual Obligations
Our principal commitments consist mostly of obligations
under the loans described above.
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 . Our primary
source of revenue is our healthcare subsidiary, which records revenues from providing licensed and/or certified orthopedic procedures
. Revenue is recognized at a point in time in accordance with Accounting Standards Codification, or ASC, 606. Our healthcare subsidiary
does not have contract liabilities or deferred revenue as there are no amounts prepaid for services. We apply the following five-step
ASC 606 model to determine revenue recognition:
· identification of a contract with a customer;
· identification of the performance obligations in the contact;
42
· determination of the transaction price;
· allocation of the transaction price to the separate performance obligations; and
· recognition of revenue when performance obligations are satisfied.
We 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 we transfer 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 a performance obligation and assesses whether each promised service is distinct
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.
Established billing rates are not the same as
actual amounts recovered for our healthcare subsidiary. They generally do not reflect what we are ultimately paid by the customer,
insurance carriers and other payors, and therefore are not reported in the consolidated financial statements at that rate. 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. Historically,
these cases were 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 were 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.
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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 six weeks from paper filing. Responses may be a payment, a denial, or a request for additional information.
Our healthcare revenues are generated from professional
medical billings including facility and anesthesia services. With respect to facility and anesthesia services, we are the primary obligor
as the facility and anesthesia services are considered part of one integrated performance obligation. Historically, we receive 49% of
collections from total gross billed. Accordingly, we recognized net healthcare service revenue as 49% of gross billed amounts. Historical
collection rates are estimated using the most current prior 12-month historical payment and collection percentages.
Historically through April 2023, our healthcare
subsidiary has had contractual medical receivable sales and purchase agreements with third party factors which result in approximately
54% reduction from the accounts receivables amounts when a receivable is sold to the factors. We evaluated the factored adjustments considering
the actual factored amounts per patient on a quarterly interval, and the reductions from accounts receivable that were factored were recorded
in finance charges as other expenses on the consolidated statement of operations.
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 assets 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. We
review goodwill for impairment on a reporting unit basis annually and whenever events or changes in circumstances indicate the carrying
value of goodwill may not be recoverable. Goodwill is tested first for impairment based on qualitative factors on an annual basis or in
between if an event occurs or circumstances change that indicate the fair value may be below its carrying amount, otherwise known as a
‘triggering event’. An assessment is made of these qualitative factors as such to determine whether it is more likely than
not the fair value is less than the carry amount, including goodwill. The annual evaluation for impairment of indefinite-lived intangibles
and, if then needed after the first step, Goodwill, 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. For the year ended December 31, 2023, we determined there to be no impairment. For the year ended December 31,
2022, we recognized goodwill impairment in the amount of $2,092,048 in our former financial services segment, which is now reflected in
discontinued operations. We 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 us 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 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.
We account for our series N senior convertible preferred stock, series R convertible preferred stock, and series X 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 equity within our 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 paragraph 718-10-30-6 of the FASB
ASC, 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 the 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.