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
in our reports and presentations to stockholders or potential stockholders. In
some cases, forward-looking statements can be identified by words such as
“believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar
expressions. Such forward-looking statements include risks and uncertainties and
there are important factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements. These
factors, risks and uncertainties can be found in Part I, Item 1A, “Risk
Factors,” of the Company’s Annual Report on Form 10-K for the fiscal year ended
II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q.
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
Integrated Sciences, Inc.
The Company owns Canadian and
deliver, multidisciplinary primary health care related services and products
through the integration of medical technology, advanced therapeutics and
rehabilitative science.
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
and 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
of Ontario
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-19 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
MiTelemed+, Inc. (“MiTelemed”), a joint venture with
(“EK-Tech”). MiTelemed will operate, support and expand access and functionality
of iTelemed, EK-Tech’s enhanced proprietary telehealth platform. MiTelemed+,
through the iTelemed platform, will allow us to offer the patient and the
practitioner a sophisticated and enhanced telehealth interaction. Through the
interface of sophisticated peripheral based diagnostic tools operated by skilled
support workers in the patient’s remote location, we believe that the
practitioner’s ability and comfort to provide a uniquely comprehensive
evaluation, diagnosis, and treatment solution will be dramatically elevated.
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
were granted a Natural Product Number (NPN) by
a proprietary pure aqueous iodine micronutrient delivered in an oral or nasal
spray format for maximum impact and bioavailability.
We have two reportable segments: healthcare services and product manufacturing
and development. During the quarter ended
healthcare services and product manufacturing and development represented 65.3%
and 34.7%, respectively, of the Company’s total revenues for the quarter. We
expect the percentage of revenues generated from the product manufacturing and
development segment to increase at a greater rate than the revenue generated
from healthcare services over the coming quarters.
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.
33
On
with an accredited institutional investor (the “Purchaser”) pursuant to which
the Company agreed to issue to the Purchaser and the Purchaser agreed to
purchase (the “Purchase”), in a registered direct offering, (i)
aggregate principal amount of the Company’s senior secured convertible notes,
which notes are convertible into shares of the Company’s common stock, under
certain conditions (the “Notes”); and (ii) warrants to purchase up to 5,833,334
shares of the Company’s common stock (the “Warrants”). The securities, including
up to 68,557,248 shares of common stock issuable upon conversion under the Notes
and up to 5,833,334 shares of common stock issuable upon exercise of the
Warrants, are being offered by the Company pursuant to an effective shelf
registration statement on Form S-3 (File No. 333-254278), which was declared
effective by the
2021
The Notes have an original issue discount of 10%, resulting in gross proceeds to
the Company of
on
the Purchaser to extend the date under certain circumstances. The Company will
make monthly payments on the first business day of each month commencing on the
calendar month immediately following the sixth month anniversary of the issuance
of the Notes through
amortizing portion of the principal of each Note equal to
and unpaid interest and late charges on the Notes. All amounts due under the
Notes are convertible at any time, in whole or in part, at the holder’s option,
into common stock at the initial conversion price of
price is subject to certain adjustments; provided, however, that the Notes have
a maximum 9.99% equity blocker. If an event of default occurs, the holder may
convert all, or any part, of the principal amount of a Note and all accrued and
unpaid interest and late charge at an alternate conversion price, as described
in the Notes. Subject to certain conditions, the Company has the right to redeem
all, but not less than all, of the remaining principal amount of the Notes and
all accrued and unpaid interest and late charges in cash at a price equal to
135% of the amount being redeemed.
The Warrants are exercisable at an exercise price of
on the fourth-year anniversary of
of the Warrants.
LA Fitness Canada Amended and Restated License Agreement & Amended and Restated
Guaranty
On
License Agreement (the “Amended and Restated Canada License Agreement”) with
Canada Company
Agreement had the effect of (i) removing NHL’s obligation to develop and open a
certain number of facilities within certain designated time periods; and (ii)
revising the default provisions such that certain defaults will result only in
termination with respect to a specific facility, rather than of the license
itself. As a result of the Amended and Restated Canada License Agreement, NHL
may continue to develop and open additional facilities for business.
Pursuant to the terms of the Amended and Restated Canada License Agreement, the
Company entered into that certain Guaranty Agreement (the “Canada Guaranty”)
dated
and LA Fitness Canada, pursuant to which the Company irrevocably guaranteed the
full, unconditional, and prompt payment and performance of all of NHL’s
obligations and liabilities under the Amended and Restated Canada License
Agreement.
Stock Option Grant to Independent Directors
On
Incentive Plan, a stock option to purchase 93,955 shares of common stock at an
exercise price of
Flesias,
exercisable, (i) with respect to 7,833 shares each month, beginning on the date
of grant, until
23, 2023
grants were previously approved by the Company’s Board of Directors on
26, 2021
between the Company and Messrs. Flesias, Oliva and Pope.
34
Share Exchange Agreement to Acquire 50.1% of 12858461
On
“1285 SEA”) with 12858461
the business of providing clinic-based physiotherapy and related ancillary
services and products, and
shareholder of 1285 (the “1285 Shareholder”) to acquire 50.1% ownership of 1285
for a purchase price of
issuance, by NHL to the 1285 Shareholder, of certain non-voting NHL Exchangeable
Special Shares which can only be utilized for the purpose of exchange into an
allotment of 17,000 restricted shares of the Company’s common stock (the “Parent
1285 SEA Shares”) at the determination of the 1285 Shareholder. The number of
Parent 1285 SEA Shares was calculated by dividing the 1285 Purchase Price by
Asset Purchase Agreement with
Corp.
On
“PTHPC APA”) with
(“PTHPC”), operating a clinic-based physiotherapy, rehabilitative, and related
ancillary services and products business known as
Sports Injury Clinic
shareholder of PTHPC (the “PTHPC Shareholder”), Under the terms and conditions
of the PTHPC APA, PTHPC agreed to sell, assign and transfer to NHL, free and
clear of all encumbrances, other than permitted encumbrances, and NHL agreed to
purchase from PTHPC all of PTHPC’s right, title and interest in and to all of
its assets related to FAIR and the FAIR Business, with the exception of certain
limited exclusions, and the rights, privileges, claims and properties of any
kind whatsoever that are related thereto, whether owned or leased, real or
personal, tangible or intangible, of every kind and description and wheresoever
situated. Under the terms and conditions of the PTHPC APA, the purchase price is
Shareholder, of certain non-voting NHL Exchangeable Special Shares which can
only be utilized for the purpose of exchange into an allotment of 156,750
restricted shares of the Company’s common stock (the “Parent PTHPC APA Shares”)
at the determination of the PTHPC Shareholder. The number of Parent PTHPC APA
Shares was calculated by dividing the FAIR Purchase Price by
Membership Interest Purchase Agreement with
LLC
On
Agreement (the “CCI Agreement”) by and among the Company,
International LLC
Pursuant to the terms of the CCI Agreement, the parties agreed to enter into a
business combination transaction (the “CCI Acquisition”), pursuant to which,
among other things, the Members will sell and assign to the Company all of their
membership interests of CCI, in exchange for a total of 800,000 restricted
shares of the Company’s common stock (the “Exchange Shares”). The Exchange
Shares will be apportioned among the Members pro rata based on their respective
membership interest ownership percentage of CCI. Following the closing of the
CCI Acquisition (the “Closing”), the Company will own 100% of the issued and
outstanding membership interests of CCI, and the Members or their designees will
collectively own 800,000 restricted shares of the Company’s common stock.
Pursuant to the terms of the CCI Agreement, the Company agreed to (i) name, at
the Closing,
President of
subsidiary of the Company, (ii) enter into an employment agreement with
Chalil
The CCI Agreement may be terminated under certain customary and limited
circumstances prior to the Closing, including by either party if the conditions
to Closing of an opposing party have not been satisfied or waived by the
applicable party on or prior to
35
Restricted Stock Issuance for 2-year Independent
On
as consideration for an Independent
On
as consideration for an Independent
Closing of CCI Acquisition
On
Closing on
membership interests of CCI. On
of 800,000 restricted shares of the Company’s common stock to the Members in
connection with the CCI Acquisition and pursuant to the terms of the CCI
Agreement.
Appointment of
of
In connection with the closing of the CCI Acquisition and pursuant to the terms
of the CCI Agreement, on
Company’s Chief Medical Officer, and the President of
Group, Inc.
certain medically related business in the
the CCI Agreement, the Company expects to appoint
Company’s Board of Directors in the near future.
Chalil Employment Agreement
In connection with
Officer and NHG’s President, the Company entered into an executive agreement
(the “Chalil Agreement”) with
of the Chalil Agreement, the Company agreed to pay
salary of
equal to 10% of the net income of CCI in excess of
year during the term of the Chalil Agreement (the “Revenue Share Payment”).
cap valuation (“MCV”) from the date of the Chalil Agreement, with the following
milestone bonus parameters:
(a) For each and every
not less than 30 days (the "50M Bonus Event"),Dr. Chalil will receive$250,000 , or 0.5% of$50 million , in Company common stock. For the sake of clarity,Dr. Chalil will only be issued compensation based on$50 million MCV increments; there will be no compensation issued for anything above$50 million until the subsequent$50 million MCV milestone is achieved. This bonus will be capped at a Company MCV of$1 billion . The 50M Bonus Event stock will be issued as (i) 50% restricted shares within 30 days of the respective 50M Bonus Event or at a later date as requested byDr. Chalil , and held as an allocation toDr. Chalil , until the requisition date as provided in writing, byDr. Chalil , to the Company, and (ii) 50% registered shares from the Company's current active incentive plan within 30 days of the respective 50M Bonus Event.
(b) Upon the Company sustaining a MCV of
"2B Bonus Event"),Dr. Chalil will receive$20 million , or 1% of$1 billion , in restricted shares of Company common stock. The 2B Bonus Event stock will be issued within 30 days of the 2B Bonus Event or at a later date as requested byDr. Chalil , and held as an allocation toDr. Chalil , until Dr. Chalil provides the Company with written instructions requesting the specific stock issuance date.
(c) For each additional $1 billion MCV, beyond the 2B Bonus Event and commencing
when the Company MCV reaches
shares of the Company’s common stock.
stock issued within 30 days of each additional
later date as requested by
Chalil, until
requesting the specific stock issuance date.
36
The Company may also issue to
Board of Directors.
The term of the Chalil Agreement ends on the earlier of (i)
(ii) the time of the termination of
terms of the Chalil Agreement. The term of the Chalil Agreement will be
automatically extended for one or more additional terms of one year each unless
either party provided notice to the other party of their desire to not renew at
least 30 days prior to expiration of the then-current term.
The Company may terminate the Chalil Agreement at any time for Cause (as defined
in the Chalil Agreement) or without Cause, and
Chalil Agreement at any time with or without Good Reason (as defined in the
Chalil Agreement. If the Company terminates the Chalil Agreement without Cause
or
will pay to
accrued, and any unreimbursed expenses incurred by
through the termination date; (ii) the Company will pay to
lump sum, an amount equal to the greater of (1) the base salary that would have
been paid to
total base salary that would have been paid to
based on the base salary as of the date of termination, and the Revenue Share
Payment for the calendar year in which such termination occurs; and (iii) any
equity grant already made to
be deemed automatically vested.
Promissory Note Conversions
On
investors senior secured convertible notes, which notes are convertible into
shares of the Company’s common stock, under certain conditions. Between
2022
converted, resulting in the issuance by the Company of an aggregate of 152,948
shares of common stock upon such conversions.
For the three months ended
Revenues for the three months ended
representing an increase of
period in 2021. The increase in revenue is principally due to the acquisition of
Terragenx’ revenue for the three months ended
when comparing the revenue for the three months ended
same period in 2021 primarily due to a COVID-19 surge in
limiting clinic and eldercare patient-practitioner direct personal interaction.
Cost of revenues for the three months ended
representing an increase of
period in 2021. The increase in cost of revenues is principally due the increase
in revenue as described above. Cost of revenues as a percentage of revenue was
57.6% for the three months ended
2021. The decrease in cost of revenues as a percentage of revenue is principally
due to revenue generated by Acenzia and Terragenx that had a cost of revenue of
approximately 46%.
Operating costs for the three months ended
representing an increase of
period in 2021. The increase in operating costs is principally due to the
increase in overhead expenses associated with the acquisitions of Acenzia,
PRO-DIP, and Terragenx which was approximately
ended
expenses associated with Acenzia, PRO-DIP, and Terragenx is projected to
decrease as the Company integrates and consolidates operations. An increase in
legal and professional fees also contributed to the increase in operating
expenses.
37
Interest expense for the three months ended
representing an increase of
period in 2021. The increase is due to issuance of convertible notes for
interest paid in connection with the early repayment of a note payable of
approximately
Amortization of debt discount for the three months ended
in 2021. The increase is due to amortization of the debt discounts associated
with the convertible notes issued in
Foreign currency transaction losses for the three months ended
was
both have outstanding debt recorded on their books that is payable in US
Dollars. The exchange rate between the Canadian Dollar and the US Dollar
decreased during the second fiscal quarter of 2022; therefore creating a foreign
currency transaction loss as it will require more Canadian Dollars to repay the
debt.
Net loss attributed to
258.6%, from
principally due to (i) an increase in foreign currency transaction losses, (ii)
an increase in overhead expenses associated with the acquisitions of Acenzia,
PRO-DIP, and Terragenx which was approximately
ended
increase in amortization of debt discounts.
For the six months ended
Revenues for the six months ended
representing an increase of
period in 2021. The increase in revenue is principally due to the acquisition of
Terragenx’ revenue for the six months ended
when comparing the revenue for the six months ended
same period in 2021.
Cost of revenues for the six months ended
representing an increase of
period in 2021. The increase in cost of revenues is principally due the increase
in revenue as described above. Cost of revenues as a percentage of revenue was
58.8% for the six months ended
2021. The decrease in cost of revenues as a percentage of revenue is principally
due to revenue generated by Acenzia and Terragenx that had a cost of revenue of
approximately 47%.
Operating costs for the six months ended
representing an increase of
period in 2021. The increase in operating costs is principally due to the
increase in overhead expenses associated with the acquisitions of Acenzia,
PRO-DIP, and Terragenx which was approximately
ended
expenses associated with Acenzia, PRO-DIP, and Terragenx is projected to
decrease as the Company integrates and consolidates operations. An increase in
legal and professional fees also contributed to the increase in operating
expenses for the six months ended
Interest expense for the six months ended
representing an increase of
period in 2021. The increase is due to issuance of convertible notes for
interest paid in connection with the early repayment of a note payable of
approximately
Amortization of debt discount for the six months ended
in 2021. The increase is due to amortization of the debt discounts associated
with the convertible notes issued in
Foreign currency transaction losses for the six months ended
was
both have outstanding debt recorded on their books that is payable in US
Dollars. The exchange rate between the Canadian Dollar and the US Dollar has
decreased since
transaction loss as it will require more Canadian Dollars to repay the debt.
Net loss attributed to
213.2%, from
principally due (i) an increase in foreign currency transaction losses, (ii) an
increase in overhead expenses associated with the acquisitions of Acenzia,
PRO-DIP, and Terragenx which was approximately
ended
increase in amortization of debt discounts.
38
Liquidity and Capital Resources
As shown in the accompanying unaudited condensed consolidated financial
statements, for the six months ended
loss of
During the six months ended
operating activities of
2021. The principal reason for the increase in cash used in operating activities
is the net loss incurred and the changes in noncash expenses and changes in
operating asset and liability accounts.
During the six months ended
investing activities of
During the period in 2022 the Company purchased property and equipment of
During the six months ended
financing activities of
2021. The principal reason for the increase in cash provided by financing
activities was the issuance of convertible notes payable in
Financial Impact of COVID-19
In
having been reported throughout both
national, provincial, state and local governmental authorities issued
proclamations and/or directives aimed at minimizing the spread of COVID-19.
Accordingly, on
in-clinic non-essential services to protect the health and safety of its
employees, partners, and patients. Commencing in
to begin providing some services, and was fully operational again in
As of
following all mandated guidelines and protocols from
Ministry of Health
ensure a safe treatment environment for our staff and clients, and our eldercare
operations are fully operational. In addition,
LLC
provincial, and national guidelines and protocols related to minimizing the
spread of the COVID-19 pandemic.
Canadian federal and provincial COVID-19 governmental proclamations and
directives, including interprovincial travel restrictions, have presented
unprecedented challenges to launching our
Cooperative
Accordingly, the Company has decided to delay commencing the projects until the
2022 grow season. These joint ventures relate to the development, management,
and arrangement of medicinal farming projects involving industrial hemp for
medicinal Cannabidiol (CBD) applications.
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.
For the quarter ended
clinic and eldercare related contracted services was
decrease of
primarily due to a COVID-19 surge in
eldercare patient-practitioner direct personal interaction.
39
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
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
We believe that the following critical policies affect our more significant
judgments and estimates used in preparation of our financial statements.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity
with
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the condensed consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company regularly evaluates estimates and assumptions. The
Company bases its estimates and assumptions on current facts, historical
experience, and various other factors that it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities and the accrual of costs and
expenses that are not readily apparent from other sources. This applies in
particular to useful lives of non-current assets, impairment of non-current
assets, allowance for doubtful accounts, allowance for slow moving and obsolete
inventory, and valuation allowance for deferred tax assets. The actual results
experienced by the Company may differ materially and adversely from the
Company’s estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be affected.
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
of property and equipment of 20% would result in an annual decrease to
depreciation expense of approximately
40 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
20% would result in an annual decrease to amortization expense of approximately
Long-Lived Assets
The Company applies the provisions of the
(the “FASB”) Accounting Standards Codification (“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
of businesses acquired. Under
subject to annual impairment tests. The Company recorded goodwill related to its
acquisition of
Executive Fitness Leaders during the fiscal year ended
Plus Physiotherapy Rockland during the fiscal year ended
41 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.
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 the FASB’s Accounting Standards Update (“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.
42
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.
Foreign Currency Transactions and Comprehensive Income
included in net income. Certain statements, however, require entities to report
specific changes in assets and liabilities, such as gain or loss on foreign
currency translation, as a separate component of the equity section of the
balance sheet. Such items, along with net income, are components of
comprehensive income. The functional currency of the Company’s Canadian
subsidiaries is the Canadian dollar. Translation gains (losses) are classified
as an item of other comprehensive income in the stockholders’ equity section of
the condensed consolidated balance sheets.
New Accounting Pronouncements
In
(Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13
was issued to improve financial reporting by requiring earlier recognition of
credit losses on financing receivables and other financial assets in scope. The
new standard represents significant changes to accounting for credit losses.
Full lifetime expected credit losses will be recognized upon initial recognition
of an asset in scope. The current incurred loss impairment model that recognizes
losses when a probable threshold is met will be replaced with the expected
credit loss impairment method without recognition threshold. The expected credit
losses estimate will be based upon historical information, current conditions,
and reasonable and supportable forecasts. This ASU as amended by ASU 2019-10, is
effective for fiscal years beginning after
currently evaluating the effect of this ASU on the Company’s condensed
consolidated financial statements and related disclosures.
In
Income Taxes which amends ASC 740 Income Taxes(ASC 740). This update is intended
to simplify accounting for income taxes by removing certain exceptions to the
general principles in ASC 740 and amending existing guidance to improve
consistent application of ASC 740. This update is effective for fiscal years
beginning after
elements, some of which are applied on a prospective basis and others on a
retrospective basis with earlier application permitted. The Company is currently
evaluating the effect of this ASU on the Company’s condensed consolidated
financial statements and related disclosures.
43
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
2021
Company’s condensed consolidated financial statements and related disclosures.
In
with conversion options, revises the criteria for applying the derivative scope
exception for contracts in an entity’s own equity, and improves the consistency
for the calculation of earnings per share. The guidance is effective for annual
reporting periods and interim periods within those annual reporting periods
beginning after
In
exceptions to account for the effects of reference rate reform to contracts,
hedging relationships, and other transactions that reference LIBOR or another
reference rate expected to be discontinued. The optional guidance, which became
effective on
not impacted our condensed consolidated financial statements. The Company has
various contracts that reference LIBOR and is assessing how this standard may be
applied to specific contract modifications through
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
Certified Public Accountants
management to have a material effect on the Company’s financial statements.
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