The Private Securities Litigation Reform Act of 1995 and Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), provide a
safe harbor for forward-looking statements made by or on behalf of the Company.
The Company and its representatives may from time to time make written or oral
statements that are "forward-looking," including statements contained in this
report and other filings with the
Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could have a material effect on the future financial performance of the Company. The forward-looking statements in this report are made on the basis of management's assumptions and analyses, as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances.
Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q and the information incorporated by reference in this report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.
Overview of the Company
When used herein, the terms the "Company," "we," "us" and "our" refer to
The Company owns Canadian and
We believe that "decentralizing" healthcare, through the integration of medical technology and interconnectivity, is an essential solution to the rapidly evolving fundamental transformation of how non-catastrophic healthcare is delivered both now and in the future. Specific to non-critical care, ongoing advancements in both medical technology and inter-connectivity are allowing for a shift of the patient/practitioner relationship to the patient's home and away from on-site visits to primary medical centers with mass-services. This acceleration of "ease-of-access" in the patient/practitioner interaction for non-critical care diagnosis and subsequent treatment minimizes the degradation of non-critical health conditions to critical conditions as well as allowing for more cost-effective healthcare distribution.
The Company's decentralized healthcare business model is centered on three primary pillars to best support the transformation of non-catastrophic healthcare delivery to patients and consumers:
? First Pillar: Service Networks. Deliver multidisciplinary primary care services through (i) an affiliate network of clinic facilities, (ii) small and micro footprint sized clinic facilities primarily located within the footprint of box-store commercial enterprises, (iii) clinic facilities operated through a franchise relationship with the Company, and (iv) corporate operated clinic facilities. ? Second Pillar: Technology. Develop, deploy, and integrate sophisticated interconnected technology, interfacing the patient to the healthcare practitioner thus expanding the reach and availability of the Company's services, beyond the traditional clinic location, to geographic areas not readily providing advanced, peripheral based healthcare services, including the patient's home. ? Third Pillar: Products. Develop and distribute effective, personalized health and wellness product solutions allowing for the customization of patient preventative care remedies and ultimately a healthier population. The Company's science-first approach to product innovation further emphasizes our mandate to create and provide over-the-counter preventative and maintenance care solutions. 31
First Pillar - Service Networks for Hands-on
Innovation through science combined with the integration of sophisticated, secure technology assures us of continued cutting edge advancement in patient first platforms.
Our clinicians and practitioners provide certain multidisciplinary primary health care services, and related products, beyond the medical doctor first level contact identified as primary care. Our clinicians and practitioners are not licensed medical doctors, physicians, specialist, nurses or nurse practitioners. Our clinicians and practitioners are not authorized to practice primary care medicine and they are not medically licensed to prescribe pharmaceutical based product solutions.
Our team of multidisciplinary primary health care clinicians and practitioners
provide assessment, diagnosis, treatment, pain management, rehabilitation,
education and primary prevention for a wide array of orthopedic,
musculoskeletal, sports injury, and neurological conditions across various
demographics including pediatric, adult, and geriatric populations through our
16 corporate-owned clinics, a contracted network of affiliate clinics, and
eldercare related long-term care homes, retirement homes, and community-based
locations in
Our specialized multidisciplinary primary health care services include physiotherapy, chiropractic care, manual/manipulative therapy, occupational therapy, eldercare, massage therapy (including pre- and post-partum), acupuncture and functional dry needling, chiropody, stroke and traumatic brain injury/neurological rehabilitation, kinesiology, vestibular therapy, concussion management and baseline testing, trauma sensitive yoga and meditation for concussion-acquired brain injury and occupational stress-PTSD, women's pelvic health programs, sports medicine therapy, assistive devices, dietitian, holistic nutrition, fall prevention education, sports team conditioning programs including event and game coverage, and private personal training.
Additionally, we continue to expand our patient care philosophy of maintaining an on-going continuous connection with our current and future patient community, beyond the traditional confines of brick-and-mortar facilities, by extending oversight of patient diagnosis, care and monitoring, directly through various Medical Technology Platforms either in-use or under development.
The occupational therapists, physiotherapists, chiropractors, massage
therapists, chiropodists and kinesiologists contracted, by NHL, to provide
occupational therapy, physical therapy and fall prevention assessment services
are registered with the
Our strict adherence to public regulatory standards, as well as self-imposed
standards of excellence and regulation, have allowed us to navigate with ease
through the industry's licensing and regulatory framework. Compliant treatment,
data and administrative protocols are managed through a team of highly trained,
certified health care and administrative professionals. We and our affiliates
provide service to the Canadian property and casualty insurance industry,
resulting in a regulated framework governed by the
Second Pillar - Interconnected Technology for Virtual Ecosystem of Services, Products and Digital Health Offerings
Decentralization through the integration of interconnected technology platforms has been adopted and is thriving in a variety of sectors and industries such as transportation (Uber, Lyft), real estate (Zillow, Redfin, Airbnb, VRBO), used car sales (Carvana, Vroom), stock and financial markets (Robinhood, Acorns, Webull) and so many other sectors. Yet decentralization of the non-critical primary care and wellness sector of healthcare is lagging significantly in capability and benefit for patient access and delivery of services and products. The COVID pandemic has taught both patients and healthcare providers the viability, importance, and benefits of decentralized access to primary care simply through the rapid adoption of telehealth/telemedicine.
32
The Company's focus on a holistic approach to patient-first health and wellness, through innovation and decentralization, includes maintaining an on-going continuous connection with our current and future patient community, beyond the traditional confines of brick-and-mortar facilities, by extending oversight of patient evaluation, diagnosis, treatment solutions, and monitoring, directly through various Medical Technology Platforms and periphery tools either in-use or under development. Through the integration and deployment of sophisticated and secure technology and periphery diagnostic tools, the Company is working to expand the reach of our non-critical primary care services and product offerings, beyond the traditional clinic locations, to geographic areas not readily providing advanced primary care service to date, including the patient's home.
NovoConnect, the Company's proprietary mobile application with a fully
securitized tech stock, telemedicine/telehealth and remote patient monitoring
fall under this Second Pillar. In
Third Pillar - Health and Wellness Products
We believe our science first approach to product offerings further emphasizes the Company's strategic vision to innovate, evolve, and deliver over-the-counter preventative and maintenance care solutions as well as therapeutics and personalized diagnostics that enable individualized health optimization.
As the Company's patient base grows through the expansion of its corporate owned clinics, its affiliate network, its micro-clinic facility openings, its interconnected technology platforms, and other growth initiatives, the development and distribution of high-quality wellness product solutions is integral to (i) offering effective product solutions allowing for the customization of patient preventative care remedies and ultimately a healthier population, and (ii) maintaining an on-going relationship with our patients through the customization of patient preventative and maintenance care solutions.
The Company's product offering ecosystem is being built through strategic
acquisitions and engaging in licensing agreements with partners that share our
vision to provide a portfolio of products that offer an essential and
differentiated solution to health and wellness globally. Our 2021 acquisitions
of
We have two reportable segments: healthcare services and product manufacturing
and development. During the quarter ended
33 Recent Developments Coronavirus (COVID-19)
While all of the Company's business units are operational at the time of this filing, any future impact of the COVID-19 pandemic on the Company's operations remains unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced patient traffic and reduced operations. For more information regarding the impact of COVID-19 on the Company, see "-Liquidity and Capital Resources-Financial Impact of COVID-19" of this quarterly report on Form 10-Q.
Reverse Stock Split
On
On
Jefferson Street Capital Stock Purchase Agreement & Secured Convertible Promissory Note
On
Pursuant to the terms of the Jefferson SPA, on
Any amount of principal, interest or other amount due on the Jefferson Note that is not paid when due will bear interest at the rate of the lesser of (i) 12%, or (b) the maximum rate allowed by law.
Jefferson may, at any time, convert all or any portion of the then outstanding
and unpaid principal amount and interest into shares of the Company's common
stock at a conversion price of
On
34
Terra may prepay the Jefferson Note at any time in accordance with the terms of the Jefferson Note.
Except as related to the next transaction after the issue date of the Jefferson
Note conducted on the Company's behalf by the
? At Jefferson's option, 15% of the net cash proceeds of any future financings by the Company, Terra or any subsidiary, whether debt or equity, or any other financing proceeds such as cash advances, royalties or earn-out payments. ? All net proceeds from any sale of assets of the Company, Terra or any subsidiaries other than sales of inventory in the ordinary course of business or receipt by the Company or any subsidiaries of any tax credits or collections pursuant to any settlement or judgement. ? Net proceeds resulting from the sale of any assets outside of the ordinary course of business or securities in any subsidiary.
Platinum Point Capital Stock Purchase Agreement & Secured Convertible Promissory Note
On
Pursuant to the terms of the Platinum SPA, on
Any amount of principal, interest or other amount due on the Platinum Note that is not paid when due will bear interest at the rate of the lesser of (i) 12%, or (b) the maximum rate allowed by law.
Platinum may, at any time, convert all or any portion of the then outstanding
and unpaid principal amount and interest into shares of the Company's common
stock at a conversion price of
On
Terra may prepay the Platinum Note at any time in accordance with the terms of the Platinum Note.
Except as related to the next transaction after the issue date of the Platinum
Note conducted on the Company's behalf by the
35 ? At Platinum's option, 15% of the net cash proceeds of any future financings by the Company, Terra or any subsidiary, whether debt or equity, or any other financing proceeds such as cash advances, royalties or earn-out payments. ? All net proceeds from any sale of assets of the Company, Terra or any subsidiaries other than sales of inventory in the ordinary course of business or receipt by the Company or any subsidiaries of any tax credits or collections pursuant to any settlement or judgement. ? Net proceeds resulting from the sale of any assets outside of the ordinary course of business or securities in any subsidiary
On
The Notes have an original issue discount of 10%, resulting in gross proceeds to
the Company of
The Warrants are exercisable at an exercise price of
For the three months ended
Revenues for the three months ended
Cost of revenues for the three months ended
Operating costs for the three months ended
36
Interest expense for the three months ended
Foreign currency transaction losses for the three months ended
Net loss attributed to
Liquidity and Capital Resources
As shown in the accompanying condensed consolidated financial statements, for
the three months ended
During the three months ended
During the three months ended
During the three months ended
Financial Impact of COVID-19
In
On
Specific to our clinic-based services and products, operating under COVID-19
related authorized governmental proclamations and directives, between
37
Specific to our eldercare based services and products, operating under COVID-19
related authorized governmental proclamations and directives which included
certain eldercare related services being deemed essential, NHL was able to
quickly expand its existing eldercare related physiotherapy service
"virtual-care" platform, which pre-pandemic was primarily focused on providing
"virtual-care" services to both smaller and remote eldercare homes to ensure
access to service providers, when needed; and continuity of care to eldercare
patients without service providers in their area. Given NHL had established
"virtual care" procedures and forms, complete with video consent and assessment
forms already vetted and approved by the
On
Canadian federal and provincial COVID-19 governmental proclamations and
directives, including interprovincial travel restrictions, have presented
unprecedented challenges to launching our
For the quarter ended
Specific to Acenzia, Terragenx, and PRO-DIP, each company is open and fully operational while following all local, state, provincial, and national guidelines and protocols related to minimizing the spread of the COVID-19 pandemic.
While all of the Company's business units are operational at the time of this filing, any future impact of the COVID-19 pandemic on the Company's operations remains unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including, but not limited to, (i) the duration of the COVID-19 outbreak and additional variants that may be identified, (ii) new information which may emerge concerning the severity of the COVID-19 pandemic, and (iii) any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced patient traffic, and reduced operations.
Our capital requirements going forward will consist of financing our operations until we are able to reach a level of revenues and gross margins adequate to equal or exceed our ongoing operating expenses. We do not have any credit agreement or source of liquidity immediately available to us.
Off-Balance Sheet Arrangements
We do not have any 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 that is material to investors.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in
We believe that the following critical policies affect our more significant judgments and estimates used in preparation of our financial statements.
38 Use of Estimates
The preparation of condensed consolidated financial statements in conformity
with
Property and Equipment
Property and equipment are stated at cost less depreciation and impairment. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the declining balance method for substantially all assets with estimated lives as follows:
Building 30 years Leasehold improvements 5 years Clinical equipment 5 years Computer equipment 3 years Office equipment 5 years Furniture and fixtures 5 years
The Company has not changed its estimate for the useful lives of its property
and equipment, but would expect that a decrease in the estimated useful lives of
property and equipment of 20% would result in an annual increase to depreciation
expense of approximately
Intangible Assets The Company's intangible assets are being amortized over their estimated useful lives as follows: Land use rights 50 years (the lease period) Software license 7 years Intellectual property 7 years Customer relationships 5 years Brand names 7 years Workforce 5 years
The intangible assets with finite useful lives are reviewed for impairment when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair value of the long-lived assets. The Company has not
changed its estimate for the useful lives of its intangible assets but would
expect that a decrease in the estimated useful lives of intangible assets of 20%
would result in an annual increase to amortization expense of approximately
39 Long-Lived Assets
The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets, including right-of-use assets, used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal.
Right-of-use Assets
The Company's right-of-use assets consist of leased assets recognized in accordance with ASC 842, Leases, which requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liability represents the Company's obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in the condensed consolidated statements of operations and comprehensive loss. The Company determines the lease term by agreement with lessor. In cases where the lease does not provide an implicit interest rate, the Company uses the Company's incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.
Goodwill
Accounts Receivable
Accounts Receivable are recorded, net of allowance for doubtful accounts and sales returns. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentration, customer credit worthiness, current economic trends, and changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance for doubtful accounts when identified. The Company has not changed its methodology for estimating allowance for doubtful accounts and historically the change in estimate has not been significant to the Company's financial statements. If there is a deterioration of the Company's customers' ability to pay or if future write-offs of receivables differ from those currently anticipated, the Company may have to adjust its allowance for doubtful accounts, which would affect earnings in the period the adjustments are made.
Inventory
Inventories are valued at the lower of cost (determined by the first in, first out method) and net realizable value. Management compares the cost of inventories with the net realizable value and allowance is made for writing down their inventories to net realizable value, if lower. Inventory is segregated into three areas: raw materials, work-in-process and finished goods. The Company periodically assessed its inventory for slow moving and/or obsolete items and any change in the allowance is recorded in cost of revenue in the accompanying condensed consolidated statements of operations and comprehensive loss. If any are identified an appropriate allowance for those items is made and/or the items are deemed to be impaired.
40 Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has not changed it methodology for estimating the valuation allowance. A change in valuation allowance affect earnings in the period the adjustments are made and could be significant due to the large valuation allowance currently established.
Under ASC 740, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.
Revenue Recognition
The Company's revenue recognition reflects the updated accounting policies as per the requirements of ASU No. 2014-09, Revenue from Contracts with Customers ("Topic 606"). As sales are and have been primarily from providing healthcare services the Company has no significant post-delivery obligations.
Revenue from providing healthcare and healthcare related services and product sales are recognized under Topic 606 in a manner that reasonably reflects the delivery of its products and services to customers in return for expected consideration and includes the following elements:
? executed contracts with the Company's customers that it believes are legally enforceable; ? identification of performance obligations in the respective contract; ? determination of the transaction price for each performance obligation in the respective contract; ? allocation the transaction price to each performance obligation; and ? recognition of revenue only when the Company satisfies each performance obligation.
These five elements, as applied to the Company's revenue category, are summarized below:
? Healthcare and healthcare related services - gross service revenue is recorded in the accounting records at the time the services are provided (point-in-time) on an accrual basis at the provider's established rates. The Company reserves a provision for contractual adjustment and discounts that are deducted from gross service revenue. The Company reports revenues net of any sales, use and value added taxes. ? Product sales - revenue is recorded at the point of time of delivery Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation - Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the requisite service period. The Company recognizes in the condensed consolidated statements of operations and comprehensive loss the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share ("EPS") is based on the weighted average number of common shares outstanding. Diluted EPS assumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
41
Foreign Currency Transactions and Comprehensive Income
New Accounting Pronouncements
In
In
In May, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260),
Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock
Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40):Issuer's Accounting for Certain Modifications or
Exchanges of Freestanding Equity-Classified Written Call Options.This update
provides guidance for a modification or an exchange of a freestanding
equity-classified written call option that is not within the scope of another
Topic. This update is effective for fiscal years beginning after
In
In
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying condensed consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Recent accounting pronouncements issued by the FASB, the
42
© Edgar Online, source