GFLT 10-Q
GenFlat Holdings, Inc. (GFLT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One) | ||
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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For the quarterly period ended: | ||
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or | ||
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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Commission File Number: | ||
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code) | ||
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__________________________________________________________ | ||
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Healthcare Business Resources Inc.
Table of Contents
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PART I – FINANCIAL INFORMATION |
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Item 1. | Financial Statements: |
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| Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited) |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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HEALTHCARE BUSINESS RESOURCES | ||||||||
Consolidated Balance Sheets | ||||||||
(Unaudited) | ||||||||
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| August 31, 2021 |
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| February 28, 2021 |
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Assets | ||||||||
Current Assets: |
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Cash and cash equivalents |
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Note receivable |
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Interest receivable |
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Total current assets |
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Noncurrent Assets: |
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Other assets |
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Right of use asset - operating lease |
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License |
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Total noncurrent assets |
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Total Assets |
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Liabilities and Stockholders' Equity (Deficit) | ||||||||
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Current Liabilities: |
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Accounts payable |
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Accrued expenses |
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Current portion of right of use liability - operating lease |
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Notes payable |
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Note payable - related party |
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Total current liabilities |
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Right of use liability - operating lease, net current portion |
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Total noncurrent liabilities |
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Total Liabilities |
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Commitments and contingencies |
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Stockholders' Equity (Deficit): |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders' Equity (Deficit) |
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Total Liabilities and Stockholders' Equity (Deficit) |
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See accompanying notes to the unaudited consolidated financial statements. | ||||||||
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HEALTHCARE BUSINESS RESOURCES | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
For the three and six months ended August 31, 2021 and 2020 | ||||||||||||||||
(Unaudited) | ||||||||||||||||
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| Three months ended |
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| Six months ended |
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| August 31, 2021 |
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| August 31, 2020 |
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| August 31, 2021 |
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| August 31, 2020 |
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Revenue: |
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Revenue |
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Total revenue |
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Operating expenses: |
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General and administrative |
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Professional fees |
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Total operating expenses |
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Loss from operations |
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Other expenses: |
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Interest income |
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Interest expense |
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Total other expense |
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Net loss |
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Loss per share - basic and diluted |
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Weighted average shares outstanding - basic and diluted |
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See accompanying notes to the unaudited consolidated financial statements. | ||||||||||||||||
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| Table of Contents |
HEALTHCARE BUSINESS RESOURCES | ||||||||||||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) | ||||||||||||||||||||
For the three and six months ended August 31, 2021 and 2020 | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
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| Total |
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| Additional |
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| Common Stock |
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| Shares |
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| Amount |
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| Capital |
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Balance February 28, 2021 |
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Common shares issued for cash, net |
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Common shares issued for settlement of accounts payable |
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Stock-based compensation |
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Net loss |
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Balance May 31, 2021 |
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Common shares issued for cash, net |
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Common shares and warrants issued for license |
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Stock-based compensation |
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Net loss |
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Balance August 31, 2021 |
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Balance February 29, 2020 |
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Net loss |
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Balance May 31, 2020 |
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Stock-based compensation |
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Net loss |
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Balance August 31, 2020 |
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See accompanying notes to the unaudited consolidated financial statements. | ||||||||||||||||||||
| 5 |
| Table of Contents |
HEALTHCARE BUSINESS RESOURCES | ||||||||
Consolidated Statements of Cash Flows | ||||||||
For the six months ended August 31, 2021 and 2020 | ||||||||
(Unaudited) | ||||||||
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Cash Flows from Operating Activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock based compensation |
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Amortization of right of use asset - operating lease |
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Changes in operating assets and liabilities: |
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Interest receivable |
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Other asset |
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Accounts payable |
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Accrued expenses |
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Right of use operating lease liability |
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Net cash used in operating activities |
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Cash Flows from Investing Activities: |
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Note receivable |
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Net cash used in investing activities |
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Cash Flows from Financing Activities: |
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Proceeds from notes payable |
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Proceeds from notes payable - related party |
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Proceeds from equity issuance, net |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Cash and cash equivalents, at beginning of period |
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Cash and cash equivalents, at end of period |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
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Cash paid for income taxes |
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Supplemental disclosure of non-cash investing and financing activities: |
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Common shares issued for settlement of accounts payable |
| $ |
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| $ |
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Common shares and warrants issued for license |
| $ |
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| $ |
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Capitalization of ROU asset and liability - operating |
| $ |
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See accompanying notes to the unaudited consolidated financial statements. | ||||||||
| 6 |
| Table of Contents |
HEALTHCARE BUSINESS RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND GOING CONCERN
On September 9, 2019 (commencement of operations), Healthcare Business Resources, Inc. (“we”, “our”, the “Company”), a domestic corporation was organized in Delaware to provide consulting services to healthcare organizations. These services include management consulting related to sales, marketing, business development and advisory board function. The Company’s services are designed to help clients increase revenue, improve overall efficiency and effectiveness of their operations and grow strategically.
On March 5, 2021, HBR Pointclear, LLC, a Delaware limited liability company was incorporated. HBR Pointclear, LLC was formed to enter into an Option Agreement to Purchase Business Assets with PointClear Solutions, Inc.
On June 18, 2021, we and HBR Sub, Inc., a Delaware corporation and our wholly owned subsidiary entered into and closed an Agreement and Plan of Merger (the “Merger Agreement”), with UserTech U.S. LLC, a Delaware limited liability company (“UPlus”) and UPlus Health, LLC, a Delaware limited liability company and a wholly-owned subsidiary of UPlus (“UPlus Health”). Pursuant to the Merger Agreement, and subject to the terms and conditions contained therein, HBR Sub, Inc. was merged with and into UPlus Health, with UPlus Health surviving the merger on the terms and subject to the conditions set forth in the Merger Agreement and certain ancillary agreements. UPlus Health is now our Company’s wholly owned subsidiary. UPlus helps companies across multiple industries with continuous innovation and market development through the implementation of its proprietary technology called the U+Method, which is a is a step-by-step product development methodology that focuses on front–loading the risky parts of product development before starting large buildouts (the “U+Method Technology”). UPlus has licensed to UPlus Health the U+Method Technology and related intellectual property for use in the health care and medical services industry (the “Medical Industry”), pursuant to the license attached to the Merger Agreement as Exhibit A (the “License Agreement”). UPlus and the Company believe that their individual capabilities and expertise could be combined to provide a unique integrated solution to clients in the Medical Industry; and UPlus’ post transaction participation in providing the anticipated integrated solution is set forth in the services agreement (the “Services Agreement”), a copy of which is set forth as Exhibit B to the Merger Agreement. The Company’s post transaction financial metrics plan for UPlus Health and the anticipated integrated solution is set forth in UPlus Health’s financial metrics plan (“Financial Metrics Plan”), a copy of which is set forth as Exhibit C to the Agreement. UPlus Health will be managed by the Company’s current management team.
The consideration for the merger consisted of our Company’s issuance to UPlus of
In this filing, unless context requires otherwise, references to “we,” “our,” “us” and “our Company” refer to Healthcare Business Resources Inc., a Delaware corporation, and its subsidiaries HBR Pointclear, LLC, HBR Business Development, LLC and UPlus Health, LLC.
Liquidity and Going Concern
These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain equity financings to continue operations. The Company has a history of and expects to continue to report negative cash flows from operations and a net loss. Management believes that the cash on hand is sufficient to fund its planned operations into but not beyond the near term. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern twelve months from the issuance of these consolidated financial statements. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company may seek additional funding through a combination of equity offerings, debt financings, or other third-party funding.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United Stated of America (“U.S. GAAP”) for interim unaudited financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited financial statements include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary in order to make the condensed financial statements not misleading. Operating results for the three and six months ended August 31, 2021, are not necessarily indicative of the final results that may be expected for the year ending February 28, 2022. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the period ended February 28, 2021, included in our Form 10-K filed with the SEC on June 7, 2021 (“Form 10-K”). Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
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Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Impairment of Long-lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. As of August 31, 2021, no impairment was recorded.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) or (“ASC Topic 606”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The new guidance provides a five-step process for recognizing revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also requires expanded qualitative and quantitative disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for public companies with annual reporting periods beginning after December 31, 2017 and is to be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial adoption. Early adoption is permitted for all entities but not before the original effective date for public entities. The Company adopted ASC Topic 606 on September 9, 2019 (commencement of operations).
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The Company recognizes revenue from contracts with its customers under ASC Topic 606. As sales are expected to be primarily from sales of advisory services, the Company does not expect significant post-delivery obligations. Revenue from sales of advisory services is recorded over the period earned and are recognized under ASC Topic 606 in a manner that reasonably reflects the delivery of its 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 the performance obligation within the respective contract, which is the delivery of service; |
| · | Determination of the transaction price for each performance obligation in the respective contract; |
| · | Allocation of the transaction price to each performance obligation; and |
| · | Recognition of revenue only when the Company satisfies each performance obligation |
We charged clients a fee for our management consulting services based on time (e.g. hourly or project-based or monthly) or based on a percentage of cost savings or incremental revenue (e.g. revenue or cost savings). As of August 31, 2021, we have acquired one customer who has contracted with us to market its services in exchange for a performance-based fee equal to 50% of any fee collected by this customer from business referred by our Company to this customer. We cannot estimate the value of the fee or fees we may obtain from this engagement, if any. As of August 31, 2021, we have generated limited management consulting services revenue and we are unable to determine how long, if ever, that we will ever generate enough management consulting revenue to sustain our operations.
We plan to charge clients a fee for our financial incentives services primarily based on the economic benefit we facilitate from any incentive programs, when permitted by any applicable rules and guidelines. Where contingency fees are not permissible, fixed fee contracts may be used. As part of our incentive program services, we may be at risk for certain third-party accounting, legal and consulting fees until such time as we are reimbursed by our client, if ever.
Basic and Diluted Loss Per Share
The computation of basic loss per share of common stock is based on the weighted average number of shares outstanding during the period. Diluted loss per share is calculated by dividing the Company’s net loss available to common stockholders by the diluted weighted average number of shares outstanding during the year. For the three and six months ended August 31, 2021, there were
Recent Accounting Pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying consolidated financial statements.
Reclassification
Certain reclassifications may have been made to our prior year’s financial statements to conform to our current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.
NOTE 3. NOTE RECEIVABLE
On March 12, 2021, the Company, through its wholly owned subsidiary HBR Pointclear, LLC, a Delaware limited liability company (“HBRP”); and PointClear Solutions, Inc., an Alabama corporation (“PointClear”) entered into an Option Agreement to Purchase Business Assets (the “Option Agreement”). The term of the Option (the “Option Term”) commenced on March 12, 2021, and automatically expires on August 1, 2022 (the “Option Termination Date”), unless duly extended, exercised, or sooner terminated as provided in the Option Agreement.
PointClear is a health care focused information technology solutions company that provides its clients technology driven solutions based upon its three core competencies; (i) Strategic planning, (ii) Digitization and Design, and (iii) Production and Implementation (the “Business”). Pursuant to the Option Agreement, PointClear granted to HBRP an exclusive non-cancelable option (the “Option”) to require PointClear to enter into an Asset Purchase Agreement (the “Asset Purchase Agreement”) under which, HBRP may (i) purchase all of PointClear’s tangible and intangible assets used in, or useful to the Business (the “Business Assets”), and (ii) the assume certain defined liabilities and contracts related to the Business. The Option provides HBRP the right, but not the obligation, to (i) enter into the Asset Purchase Agreement at any time until August 1, 2022 (the “Option Term”), and (ii), require PointClear to sell the Business Assets and perform under the Asset Purchase Agreement.
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Pursuant to the Option, HBRP shall arrange for a unsecured loan of up to $
NOTE 4. NOTE PAYABLE
Notes Payable
On March 15, 2021, the Company issued a Promissory Note in the aggregate principal amount of $
On June 11, 2021, the Company issued a promissory note in the aggregate principal amount of $
On August 6, 2021, the Company issued a promissory note in the aggregate principal amount of $
Notes Payable – Related Party
On June 10, 2021, the Company issued to Kenneth Hawkins, a member of the Company’s board of directors, a promissory note in the aggregate principal amount of $
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NOTE 5. EQUITY
Common stock
During six months ended August 31, 2021, we issued (i)
During the six months ended August 31, 2021, the Company issued
On June 18, 2021, the Company issued to UPlus
Incentive Stock Options
During the six months August 31, 2021, the Board of Directors approved grants of
During the six months ended August 31, 2021, the Company recognized $
The following table summarizes the stock option activity for the six months ended August 31, 2021:
|
|
|
|
| Weighted Average |
| ||
|
| Number of Options |
|
| Exercise Price Per Share |
| ||
Outstanding at February 28, 2021 |
|
|
|
| $ |
| ||
Granted |
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
|
| |
Forfeited and expired |
|
| ( | ) |
|
|
| |
Outstanding at August 31, 2021 |
|
|
|
| $ |
| ||
As of August 31, 2021, there were
Stock Warrants
On June 18, 2021, the Company issued a three-year warrant to purchase
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The following table summarizes the stock warrant activity for the six months ended August 31, 2021:
|
|
|
|
| Weighted Average |
| ||
|
| Number of Warrants |
|
| Exercise Price Per Share |
| ||
Outstanding at February 28, 2021 |
|
| - |
|
| $ |
| |
Granted |
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
|
| |
Forfeited and expired |
|
| - |
|
|
|
|
|
Outstanding at August 31, 2021 |
|
|
|
| $ |
| ||
As of August 31, 2021, the outstanding stock warrants have a weighted average remaining term of
The aggregate fair value of the options and warrants measured during the six months ended August 31, 2021 were calculated using the Black-Scholes option pricing model based on the following assumptions:
Expected life |
|
| ||
Volatility |
| % | ||
Dividend yield |
|
| % | |
Risk free interest rate |
| % | ||
NOTE 6. RISK CONCENTRATIONS
Financial instruments that potentially expose the Company to certain concentrations of credit risk include cash in bank accounts. The cash deposits, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation (“FDIC”). Beginning January 1, 2013, as per FDIC, all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit are standardly insured for up to $
NOTE 7. LEASE
On July 1, 2021,
The following table provides the maturities of lease liabilities at August 31, 2021:
|
| Operating |
| |
|
| Lease |
| |
Maturity of Lease Liability at August 31, 2021 |
|
|
| |
2021 |
| $ |
| |
2022 |
|
|
| |
Total future undiscounted lease payments |
| $ |
| |
Less: Amounts representing interest |
|
| ( | ) |
Present value of lease liabilities |
| $ |
| |
NOTE 8. SUBSEQUENT EVENTS
On September 29, 2021, the Company, through HBRP and PointClear entered into a Separation and Settlement Agreement (“Separation and Settlement Agreement”), effective October 1, 2021, and terminated their mutual obligations under the Option Agreement and Improvement Loan Agreement. Pursuant to the Separation and Settlement Agreement, with respect to the: (i) Option Agreement, the Option Agreement is cancelled and none of the parties have any current or future rights or obligations under the Option Agreement; (ii) Improvement Loan Agreement, the principal owed by PointClear under the Improvement Loan Agreement is reduced to $
On October 5, 2021, in consideration of $
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Information
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.
Examples of forward-looking statements include:
● | the timing of the development of future products; |
● | projections of costs, revenue, earnings, capital structure and other financial items; |
● | statements of our plans and objectives; |
● | statements regarding the capabilities of our business operations; |
● | statements of expected future economic performance; |
● | statements regarding competition in our market; and |
● | assumptions underlying statements regarding us or our business. |
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The ultimate correctness of these forward-looking statements depends upon several known and unknown risks and events. We discuss our known material risks under “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 7, 2021. However, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the Securities and Exchange Commission, particularly any future Annual Reports on Form 10- K, any Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K. Many factors could cause our actual results to differ materially from the forward-looking statements. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
We caution you that actual outcomes and results may differ materially from what is expressed, implied, or forecast. We caution you that actual outcomes and results may differ materially from what is expressed, implied, or forecast by our forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
Overview
We operate primarily in the healthcare industry and provide services that include management consulting related to sales, marketing, business development and advisory board functions to healthcare organizations; and financial incentive program services to identify grants, tax credits and other government incentives for companies across a variety of industries including healthcare.
In this filing, unless context requires otherwise, references to “we,” “our,” “us” and “our Company” refer to Healthcare Business Resources Inc., a Delaware corporation, and its subsidiaries HBR Pointclear, LLC, HBR Business Development, LLC and UPlus Health, LLC
Principal Services
We are in our development stage. We plan to generate revenue by providing consulting services. These services include:
● | management consulting related to sales, marketing, business development and advisory board functions to healthcare organizations; |
● | financial incentive program services to identify grants, tax credits and other government incentives for companies across a variety of industries including healthcare; and |
● | technology consulting and engineering services. |
Our management, board of advisors and board of directors have extensive experience in market expansion strategies, financial analysis, acquisition integration, management consulting and training, healthcare law, corporate law, capital markets, mergers and acquisitions. We believe the combined experience, knowledge, credibility and connections of our people are unique and potentially valuable to prospective clients. As a result, even though we are a new business with limited revenues to date, we believe we will successfully execute our business plan.
Management consulting services
Our management consulting services are designed to help clients increase revenue, improve overall efficiency of their operations, grow strategically and increase profitability. We provide clients with advice and assistance tailored to address each client’s challenges and opportunities, with a focus on healthcare organizations that face operational and financial changes. We believe that distressed companies respond to challenges by restructuring their business and capital structure, while healthy companies strive to capitalize on opportunities by improving operations, reducing costs and maximizing revenue. Many organizations have limited resources dedicated to respond effectively to challenges and opportunities. As a result, we believe many organizations seek to supplement their internal resources with experienced independent consultants like us.
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As part of our management consulting services, we will perform an initial review of a prospective clients relevant financial, tax and business documentation at no cost to determine areas for potential corporate improvement and growth opportunities.
We plan to charge clients a fee for our management consulting services based on time (e.g., hourly or project-based or monthly) or based on a percentage of cost savings or incremental revenue (e.g. revenue or cost savings). As of August 31, 2021, we have acquired one customer who has contracted with us to market its services in exchange for a performance-based fee equal to 50% of any fee collected by this customer from business referred by our Company to this customer. We cannot estimate the value of the fee or fees we may obtain from this engagement, if any. As of August 31, 2021, we have generated limited management consulting services revenue. We cannot assure you that we will ever generate enough management consulting revenue to sustain our operations.
Financial incentive program services
Our financial incentive program services are designed to identify grants, tax credits and other government incentives for companies across a variety of industries including healthcare. We will assist with advising on and documenting business processes related to such credits and rebates and work with certified public accounting firms and business owners to compile reports and documentation required to apply for various financial incentive programs.
As part of our financial incentive program services, we will perform an initial review of a prospective client’s relevant financial, tax and business documentation at no cost to determine the potential economic benefits from various federal and state incentive programs.
We plan to charge clients a fee primarily based on the economic benefit we facilitate from any incentive programs, when permitted by any applicable rules and guidelines. Where contingency fees are not permissible, fixed fee contracts may be used. As part of our incentive program services, we may be at risk for certain third-party accounting, legal and consulting fees until such time as we are reimbursed by our client, if ever.
As of August 31, 2021, we generated no revenue from financial incentive program services. Currently, have multiple consulting opportunities in various stages of active review by potential customers; however, we cannot assure you that any of these potential customers will engage our Company for services. Further, we cannot assure you that we will ever generate enough financial incentive program revenue to sustain our Company’s operations.
Technology consulting and engineering services
Our technology consulting and engineering services include digital strategy, design, development, and management services, with expertise in enterprise software, mobile and web-based application solutions. These services are designed to help clients speed innovation, expand market share, drive revenue, and encourage patient satisfaction and population health.
As part of our technology consulting and engineering services, we perform an initial review of a prospective clients' challenges and relevant technologies to determine areas for potential improvement and growth opportunities. We charge clients a fee for our technology consulting and engineering services based on the project.
We implement the U+Method as our step-by-step product development methodology that focuses on front–loading the risky parts of product development before starting large build–outs. The U+Method enables us to determine whether and where a product fits in the market, create a learning organization to continue iterations, and, ultimately, drive profitability:
STAGE 1 - Ideation/ IP Prioritization
Ideation or IP prioritization including potential use cases
| · | Definition of commercialization goals |
| · | IP inventory & prioritization |
| · | Ranking based on highest revenue potential vs. likelihood of winning |
STAGE 2 – Validation
Initial idea validation and market testing
| · | MVP target markets (geographic) for rapid adoption |
| · | Initial GTM proposition / product |
| · | Target users |
| · | Product positioning |
| · | High-level user stories |
| · | Legal requirements |
STAGE 3 - Market Testing
Strategy for taking the MVP to market
| · | Channel testing |
| · | Pricing sensitivity |
| · | Brand and communications |
| · | Wireframe prototype of the MVP scope to test with users |
| · | Iteration of prototypes based on feedback |
| · | Microsite smoke testing |
STAGE 4 - Tech Build
Specification and build of the MVP
| · | Product definition |
| · | MVP specification |
| · | MVP scoping |
| · | UI design for target group and market |
| · | Information Architecture |
| · | AWS infrastructure and DevOps setup |
| · | Buildout in agile mode |
STAGE 5 – Scaling
Launching with the early customers and scaling operations
| · | Early customer feedback gathering |
| · | Future tech roadmap |
| · | Marketing campaigns |
| · | Customer acquisition |
| · | Customer onboarding optimization |
| · | Customer support |
| · | Ecosystem buildout |
As of August 31, 2021, we generated no revenue from technology consulting and engineering services and we are unable to determine how long, if ever, it would take to continue to attract paying clients. We cannot assure you that we will ever generate enough revenue to sustain our operations.
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Strategy
The key elements of our business model and growth strategy are as follows:
1. | Attract highly qualified advisors and consultants. We believe performance-based compensation, including stock option plan participation, will enable us to attract top talent. In the near term, we plan to primarily engage independent advisors and consultants to minimize our fixed operating expenses. To date, we have entered into advisory board agreements with advisors who have healthcare industry experience in market expansion strategies, financial analysis, acquisition integration, management consulting and training, healthcare law, corporate law, capital markets, mergers and acquisitions. |
2. | Grow our network of potential clients. We plan to grow our network of healthcare and other organizations that could benefit from our services. To be successful, we must establish and strengthen the awareness of our brand. We believe that maintaining and enhancing our brand recognition is an important aspect of our efforts to generate revenue. In the near term, we plan to promote awareness of our services through public relations efforts, social media outreach, Internet marketing and business development partnerships. Our goal is to attract healthcare and other organizations who are primarily interested in growing their business through sales, marketing and business development. |
3. | Pursue strategic acquisitions. We intend to evaluate select acquisitions of complementary businesses as another means to broaden the scope of our capabilities and our client base. For example, we are interested in acquiring companies that provide consulting, training, education, marketing, audits, cost recovery, group purchasing, compliance, certification, security, information technology and other non-clinical healthcare business services. We believe strategic acquisitions can enable us to scale our revenue with less business risk. While we are not evaluating any potential acquisition targets or have any agreements to acquire any business at this time, any future acquisition may result in unforeseen operating difficulties and expenditures particularly if the key personnel of the acquired company choose not to work for us and we may have difficulty retaining the customers of any acquired business due to changes in management and ownership. Acquisitions may also disrupt our ongoing business, divert our resources and require significant management attention that would otherwise be available for ongoing development of our business. |
Results of Operations for the three months ended August 31, 2021 compared to three months August 31, 2020
Revenues: We generated $9,245 of revenues for the three months ended August 31, 2021 compared to $2,009 for the three months ended August 31, 2020. Our revenues came from management consulting services performed for customers.
Operating Expenses: Operating expenses decreased to $179,397 for the three months ended August 31, 2021 compared to $1,471,646 for the three months ended August 31, 2020. The change in operating expenses were mainly attributed to the decrease in stock based compensation of $1,347,651 which were offset by increases in other operating expense of $55,402.
Results of Operations for the six months ended August 31, 2021 compared to six months August 31, 2020
Revenues: We generated $15,653 of revenues for the six months ended August 31, 2021 compared to $2,009 for the six months ended August 31, 2020. Our revenues came from management consulting services performed for customers.
Operating Expenses: Operating expenses decreased to $525,774 for the six months ended August 31, 2021 compared to $1,515,938 for the six months ended August 31, 2020. The change in operating expenses were mainly attributed to the decrease in stock based compensation of $1,094,799 which were offset by increases in other operating expense of $104,635.
Liquidity and Capital Resources
On August 31, 2021, we had cash of $101,208 and we had working capital deficit of $117,759.
In the future, we plan to try and raise additional capital through the issuance of additional shares of common stock or preferred stock. If we issue additional shares of common stock in the future, our then-existing stockholders may face substantial dilution.
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No assurance can be given that we will obtain access to capital markets in the future or that adequate financing to satisfy the cash requirements of implementing our business strategies will be available on acceptable terms. Our inability to gain access to capital markets or obtain acceptable financing could have a material adverse effect upon the results of our operations and financial condition. Our failure to raise additional funds if needed in the future will adversely affect our business operations, which may require us to suspend our operations and lead you to lose your entire investment.
It is likely that our operating losses will increase in the future and it is very possible we will never achieve or sustain profitability. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall or other unanticipated changes in our industry. Any failure by us to accurately make predictions would have a material adverse effect on our business, results of operations and financial condition.
Summary of Cash Flows
Cash used in operating activities
Net cash used in operating activities was $120,013 and $95,463 for the six months ended August 31, 2021 and 2020, respectively, and mainly included stock based compensation, loss on settlement of accounts payable, professional fees to our consultants, attorneys and accountants.
Cash used in investing activities
Net cash used by investing activities was $200,000 for the six months ended August 31, 2021. The amount used in 2021 is related to our option agreement with Pointclear Solution, Inc. We had no investing activities for the three months ended August 31, 2020.
Cash provided by financing activities
Net cash provided by financing activities was $386,166 for the six months ended August 31, 2021, related to the sale of common stock and proceeds from note payable. We had no financing activities for the three months ended August 31, 2020.
COVID-19
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 Outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally.
The full impact of the COVID-19 Outbreak continues to evolve as of this date. As such, we cannot estimate the full magnitude that the
pandemic will have on our business. If the COVID-19 Outbreak continues, it may have a material adverse effect on the Company’s financial condition, liquidity, and future results of operations for the Company’s fiscal year ending February 29, 2022 and beyond. Management is actively monitoring the impact of the global pandemic on its financial condition, liquidity, operations, industry, and workforce.
Given the daily evolution of the COVID-19 Outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 Outbreak on its results of operations, financial condition, or liquidity for the Company’s fiscal year ending February 29, 2022.
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The impacts of the current COVID-19 pandemic are broad reaching and the impacts on the Company’s sales of advisory services is to date unknown. Due to the COVID-19 outbreak, there is significant uncertainty surrounding the potential impact on the Company’s future results of operations and cash flows and its ability to raise capital. Continued impacts of the pandemic could materially adversely affect the Company’s near-term and long-term revenues, earnings, liquidity, and cash flows as the Company’s customers may request temporary relief, delay or not make scheduled payments on their payment commitments. The Company is actively working with its operators to proactively manage the impact of the pandemic on its business and the business of the operators.
Critical Accounting Policies
Our critical accounting policies, including the assumptions and judgments underlying them below. We have consistently applied these policies in all material respects. We do not believe that our operations to date have involved uncertainty of accounting treatment, subjective judgment, or estimates, to any significant degree.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) or (“ASC Topic 606”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The new guidance provides a five-step process for recognizing revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also requires expanded qualitative and quantitative disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for public companies with annual reporting periods beginning after December 31, 2017 and is to be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial adoption. Early adoption is permitted for all entities but not before the original effective date for public entities. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.
The Company recognizes revenue from contracts with its customers under ASC Topic 606. As sales are expected to be primarily from sales of advisory services, the Company does not expect significant post-delivery obligations. Revenue from sales of advisory services is recorded over the period earned and are recognized under ASC Topic 606 in a manner that reasonably reflects the delivery of its 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 the performance obligation within the respective contract, which is the delivery of service; |
| · | Determination of the transaction price for each performance obligation in the respective contract; |
| · | Allocation of the transaction price to each performance obligation; and |
| · | Recognition of revenue only when the Company satisfies each performance obligation |
Off-Balance Sheet Arrangements
As of August 31, 2021, 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.
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Contractual Obligations
There have been no material changes outside the ordinary course of business in our contractual commitments during the six months ended August 31, 2021.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
Our chief executive officer, who serves as our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report on Form 10-Q. Based on this evaluation, our principal executive officer/principal financial officer concluded that as a result of the material weakness in our internal control over financial reporting discussed below, our disclosure controls and procedures were not effective at ensuring that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.
The matters involving internal controls and procedures that our management considered to be material weaknesses in our internal control over financial reporting as of August 31, 2021 include the following:
● | We do not have written documentation of our internal control policies and procedures. |
● | Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. To the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. |
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard 1305) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
In light of the material weakness described above, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting. Other than noted above, there were no changes in our internal control over financial reporting during the quarter ended August 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 1A. RISK FACTORS.
Not Applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Set forth below is information regarding all securities issued by our Company during the period covered by this report:
June 2021 – August 2021 Private Placement
During June 2021 – August 2021, we issued (i) 46,000 shares of our common stock to investors who are not a “U.S. Person,” as that term is defined in Rule 902(k) of Regulation S of the Securities Act for total consideration of $23,000, or $0.50 per share; and (ii) 70,000 shares of to our common stock to investors who are “accredited investors,” as that term is defined Rule 501(a) of Regulation D for total consideration of $35,000, or $0.50 per share. The Company paid transaction fees of $2,254 resulting in net proceeds of $55,746.
June 2021 – August 2021 Option Grants - Consultants
During June 2021 – August 2021, we granted non-qualified stock options to purchase up to 80,000 shares of our common stock at an exercise price ranging from $0.50- $0.80 per share to consultants.
June 2021 Private Placement – Merger Consideration
In June 2021, pursuant to the Merger Agreement with UPlus and UPlus Health, we issued 1,000,000 shares of our common stock and a three-year warrant to purchase 1,400,000 shares of our common stock for $0.50 per share.
In connection with the above transactions, no general solicitation occurred, no commission or other remuneration was paid, and no underwriter participated. We relied upon on the exemption from registration provided in Section 4(a)(2), 4(a)(5), Regulation D, Regulation S and Rule 701 of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
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ITEM 6. EXHIBITS.
EXHIBIT INDEX
SEC Reference Number |
| Title of Document |
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| Incorporated by reference to Company’s Form 8-K filed on 06/23/2021 | ||
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| Incorporated by reference to Company’s Form S-1 Registration Statement filed on 06/08/2020 | ||
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| Incorporated by reference to Company’s Form S-1 Registration Statement filed on 09/22/2020 | ||
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| Incorporated by reference to Company’s Form 8-K filed on 03/18/2021 | ||
| Form of Asset Purchase Agreement, attached as Exhibit A to Option Agreement with PointClear |
| Incorporated by reference to Company’s Form 8-K filed on 03/18/2021 | |
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| Incorporated by reference to Company’s Form 8-K filed on 03/18/2021 | ||
| Form of Promissory Note, attached as Exhibit A to Improvement Loan Agreement with PointClear |
| Incorporated by reference to Company’s Form 8-K filed on 03/18/2021 | |
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| Incorporated by reference to Company’s Form 8-K filed on 03/18/2021 | ||
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| Incorporated by reference to Company’s Form 8-K filed on 06/23/2021 | ||
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| Incorporated by reference to Company’s Form 8-K filed on 06/23/2021 | ||
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| Incorporated by reference to Company’s Form 8-K filed on 09/30/2021 | ||
Filed Herewith | ||||
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| Filed Herewith | ||
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| Filed Herewith | ||
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| Filed Herewith | ||
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| Filed Herewith | ||
101 |
| XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-K |
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104 |
| Cover Page Interactive Data File |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report signed on its behalf by the undersigned, thereunto duly authorized on October 22, 2021.
| Healthcare Business Resources Inc. Registrant |
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By: | /s/ Stephen Epstein |
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| Stephen Epstein |
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| Chief Executive Officer and Chief Financial Officer |
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