GenFlat Holdings, Inc 10-K, filed May 30, 2023
GenFlat Holdings, Inc. (GFLT)
About this 10-K
GenFlat Holdings, Inc filed this 10-K on May 30, 2023, covering the fiscal year ended February 28, 2023.
Headline figures
Fiscal year ended February 28, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1884
- down 93.5% from $28.94K a year earlier
- Net loss
- $166.6K
- compared with a net loss of $1.65M a year earlier
- Diluted EPS
- -$0.01
- compared with -$0.08 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________________ to ___________________
Commission File Number:
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(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.) |
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code:
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Securities registered pursuant to section 12(g) of the Act:
(Title of class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 periods as 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 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, a 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. (check one)
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $
The number of shares of the registrant’s common stock outstanding as of May 30, 2023 was
TABLE OF CONTENTS
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Cautionary Statement About Forward-Looking Statements
This report on Form 10-K contains forward-looking statements. 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. You should not place undue reliance on these forward-looking statements.
Factors that are known to us that could cause a different result than projected by the forward-looking statement, include, but are not limited to:
| · | inability to generate revenue or to manage growth, and ultimately our ability to continue as a going concern; |
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| · | lack of available funding; |
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| · | lack of a market for or market acceptance of our products; |
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| · | the extent to which we are successful in gaining new long-term relationships with customers or retaining existing ones and the level of service failures that could lead customers to use competitors' services; |
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| · | our management inability to devote sufficient time to the growth and management of our business; |
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| · | competition from third parties; |
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| · | general economic and business conditions; |
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| · | strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; |
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| · | intellectual property rights of third parties; |
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| · | regulatory constraints and potential legal liability; |
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| · | ability to maintain effective internal controls; |
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| · | security breaches, cybersecurity attacks and other significant disruptions in our information technology systems; |
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| · | changes in technology and methods of marketing; |
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| · | changes in product mix; |
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| · | the novel coronavirus (“COVID-19”) and its potential impact on our business; |
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| · | those events and factors described by us in Item 1.A “Risk Factors”; |
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| · | other risks to which our Company is subject; and |
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| · | other factors beyond the Company’s control. |
Any forward-looking statement made by us in this report on Form 10-K is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
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PART I
Item 1. Business.
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. Unless context requires otherwise, references to “we,” “our,” “us” and “our Company” refer to Healthcare Business Resources Inc., a Delaware corporation, and all subsidiaries.
Business Development
Healthcare Business Resources Inc. was incorporated in Delaware on September 9, 2019. We conduct all our operations through our wholly owned subsidiaries HBR Business Development, LLC, incorporated in Delaware on January 21, 2020 and UPlus Health, LLC, a Delaware limited liability company, incorporated in Delaware on June 15 2021.
As a result of our management’s inability to devote sufficient time to the growth and management of our business at this time, to date, we have only been generating limited revenues. We hope eventually to successfully execute our business plan.
PointClear Solutions, Inc. Transaction
On March 12, 2021, our Company, through our 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 Option Agreement provided HBRP the exclusive non-cancelable right to require PointClear to enter into an Asset Purchase Agreement (“Asset Purchase Agreement”) under which, HBRP would (i) purchase all of PointClear’s tangible and intangible assets used in, or useful to the PointClear business (the “Business Assets”), and (ii) assume certain defined liabilities and contracts of PCS related to the Business. As partial consideration for receiving its rights to purchase the Business Assets under the Option Agreement, HBRP arranged for a loan of up to $750,000 to PointClear pursuant to the Improvement Loan Agreement (the “Improvement Loan Agreement”) evidenced by and repaid in accordance with the terms of a promissory note (the “Promissory Note”). On March 16, 2021, pursuant to the Option Agreement and Improvement Loan Agreement, PointClear made its first draw under the Improvement Loan Agreement for $200,000.
On September 29, 2021, all of the above parties 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:
| 1. | Option Agreement, the Option Agreement was cancelled and neither of the parties have any current or future rights or obligations under the Option Agreement. |
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| 2. | Improvement Loan Agreement, the principal owed by PointClear under the Improvement Loan Agreement was reduced to $150,000. Within 30 days of October 1, 2021, PointClear shall pay to HBRP, or its designee, $25,000 which shall reduce the principal owed under the Improvement Loan Agreement to $125,000. PointClear shall pay to HBRP, or its designee, $25,000 upon receipt from CHC of the amount owed following “Final Acceptance” testing. Any balance remaining under the Improvement Loan Agreement is hereby converted to a 60-month term loan pursuant to Section 2.05 of the Improvement Loan Agreement, and its repayment shall remain subject to the Improvement Loan Agreement. |
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| 3. | Consulting and Registrant Stock Option Agreements, the Consulting Agreements by and between HBRP and related consultants were cancelled by mutual consent and no money or consideration is owed or payable to any party thereunder according to the terms of such Consulting Agreements. The related stock option agreements by and between the Company and related consultants were cancelled by mutual consent and all option shares, vested or unvested were terminated. |
UPlus Health, LLC Transaction
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 a separate license agreement (the “License Agreement”).
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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 a separate services agreement (the “Services 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”). UPlus Health is managed by the Company’s current management team.
The consideration for the merger consisted of our Company’s issuance to UPlus of 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, subject to the Special Adjustments described in the Merger Agreement, which includes UPlus’ right to unwind the merger in the event we fail to meet the Financial Metrics Plan described in the Merger Agreement. As of August 31, 2021, the total purchase price for the acquisition was determined to be $857,990, which consisted of 1,000,000 shares of common stock with a fair value of $500,000 and 1,400,000 stock warrants with a fair value of $357,990. The Company concluded the transaction qualified as an asset acquisition and all such acquisition costs have been capitalized.
Principal Services
Our business plan provides for us 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 |
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| · | financial incentive program services to identify grants, tax credits and other government incentives for companies across a variety of industries including healthcare; and |
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| · | 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. However, as a result of our management’s inability to devote sufficient time to the growth and management of our business at this time, to date, we have generated limited revenues. We hope eventually to successfully execute our business plan. See “Description of Business - Our Competitive Strengths.”
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. Our goal is to 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.
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.
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We charge clients a fee for our management consulting services based on time (e.g., hourly or monthly) or based on a percentage of cost savings or incremental revenue (e.g., revenue or cost savings). As of the date of this report on Form 10-K, 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. This customer presently provides our Company with our sole source of management consulting revenue.
As of the date of this report on Form 10-K, we have generated limited management and 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. Our plan is to 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 will 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 the date of this report on Form 10-K, we have no customers enrolled in our financial incentive program 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 will perform an initial review of a prospective clients' challenges and relevant technologies to determine areas for potential improvement and growth opportunities. We will 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 |
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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 the date of this report on Form 10-K, we generated no revenue from technology consulting and engineering services and we are unable to determine how long, if ever, it would take to attract paying clients. We cannot assure you that we will ever generate enough revenue to sustain our operations.
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. Presently, we engage independent advisors and consultants to minimize our fixed operating expenses. 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. |
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2. | Grow our network of potential clients . We hope to continue 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. We will 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 will 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. 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. |
Sales and Marketing
We presently identify prospective management consulting and financial incentive program opportunities through personal and professional relationships of our CEO Stephen Epstein. We may pay for online advertisements and may enter into third-party marketing agreements to expand our reach.
We may also position ourselves as an opinion leader in the field through the creation of media and content; podcasts, articles, essays and other such materials to build good PR for the business and attract interest for our various consulting and advisory services. This includes possibly exhibiting and speaking at conferences and advertising in trade journals, associations, etc. We may generate referral and word-of-mouth programs to drive interest for services.
Our marketing budget is subject to several factors, including our results of operations and cash flow.
Competition
We operate in a highly competitive industry. The market for our services is competitive and rapidly changing, and the barriers to entry are relatively low. We experience competition from large established businesses possessing large, existing customer bases, substantial financial resources and established distribution channels. We expect competition to persist and intensify in the future. Competition could result in reduced sales, reduced margins or the failure of our services to achieve or maintain more widespread market acceptance, any of which could harm our business and our operating results could be harmed. Our principal competitors include any entity or individual providing consulting services, but not limited to business consultants, growth consultants, sales consultants, marketing consultants, distribution consultants and financial consultants.
Our current and potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their offerings. Our current and potential competitors have more extensive customer bases and broader customer relationships than we have. If we are unable to compete with such companies, the demand for our offering could substantially decline.
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Our Competitive Strengths
We believe our competitive strength comes from our people, our approach to business and our business model.
1. | Our people: Our management, board of advisors and board of directors have extensive experience and relationships 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. |
2. | Our business approach: We believe that the best business relationships provide tangible benefits to each party. A central tenet of our business approach is to ensure that we can provide significant value to a prospective client before entering into any services agreement. To understand the scope of a potential engagement and ensure we can satisfy the prospective clients’ primary objectives of any engagement, we are willing and able to spend time with their management team, on a completely complimentary basis, to discuss challenges and opportunities and perform an initial review of their relevant financial, tax and business circumstances. We believe the business approach of investing time and effort upfront and before any service engagement, helps establish trust and credibility, while enabling us and the prospective client to better determine if and how we can add value before entering into any agreement. |
3. | Our business model: Aside from the traditional management consulting services model where compensation is based on an hourly or monthly fee, our business model supports the engagement with clients on a performance basis. We believe that offering select clients the option to compensate us based entirely on the tangible value we provide is uncommon in our field and may enable us to attract and retain clients in competitive scenarios. |
Intellectual Property
We do not own any patents, trademarks, licenses, franchises or concessions aside from the HealthcareBusinessResources.com domain name. To protect our proprietary rights, we will generally rely on copyright, trademark and trade secret laws, confidentiality agreements with employees and third parties.
Third parties may copy or obtain and use our proprietary ideas, know-how and other proprietary information without authorization or independently develop similar or superior intellectual property. Our competitors may obtain proprietary rights that would prevent, or limit or interfere with our ability to sell our services. If we are found to infringe on the proprietary rights of others and may be required to incur substantial costs to defend any litigation, cease offering our services, obtain a license from the holder of the infringed intellectual property right or redesign our services.
Legal standards relating to the validity, enforceability and scope of protection of certain proprietary rights are still evolving. We cannot be sure of the future viability or value of any of our proprietary rights or of similar rights of other companies within this market. We cannot be certain that the steps taken by us will prevent misappropriation or infringement of our proprietary information.
Any litigation might result in substantial costs and diversion of resources and management attention and could have a material adverse effect on our business, results of operations and financial condition.
Technology
We currently use off the shelf technology to operate our business.
Regulation of our Business
We are not currently subject to direct regulation by any governmental agency other than laws and regulations generally applicable to businesses. We are subject to common business, tax and regulations pertaining to the operation of our business. We believe that compliance of governmental regulations will be additional responsibilities of our management.
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Employees
We have one part-time employee and one part-time subcontracted accountant in the United States. From time to time, we expect to employ additional independent contractors as well as legal, accounting and other specialized professionals to support our sales, marketing, business development and administrative needs.
Our success will depend on our ability to hire and retain additional qualified marketing, sales, technical and other personnel. Qualified personnel are in high demand. We face considerable competition from other management consulting service firms for these personnel, many of which have significantly greater resources than we have.
Properties
Our corporate headquarters is in Nashville, Tennessee. Substantially all our operating activities are conducted from 400 square feet of office space provided by our CEO at no charge. We believe that additional space may be required as our business expands and believe that we can obtain suitable space as needed.
Legal proceedings
We may from time to time be involved in routine legal matters incidental to our business; however, we are currently not involved in any litigation, nor are we aware of any threatened or impending litigation.
Corporate Information
Healthcare Business Resources Inc. was incorporated in Delaware on September 9, 2019. We conduct all our operations through our wholly owned subsidiaries HBR Business Development, LLC and UPlus Health, LLC. Our business address is 718 Thompson Lane, Suite 108-273, Nashville, Tennessee 37204 and our telephone number is 615-856-5542. Our website address is www.HealthcareBusinessResources.com. In this report on Form 10-K, unless context requires otherwise, references to “we,” “our,” “us” and “our Company” refer to Healthcare Business Resources Inc., a Delaware corporation, and all subsidiaries, including HBRP, which currently engages in no business operations. Information contained on our website does not constitute part of this report on Form 10-K.
Item 1A. Risk Factors.
An investment in our securities involves a high degree of risk. You should consider carefully all of the material risks described below, together with the other information contained in this report on Form 10-K. If any of the following events occur, our business, financial condition, results of operations and cash flows may be materially adversely affected. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also significantly impair our business operations and could result in a complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
As described in Note 1 of our accompanying audited financial statements, our auditors have issued a going concern opinion on our February 28, 2023 financial statements, expressing substantial doubt that we can continue as an ongoing business for the next twelve months after issuance of their report based on our history of negative cash flows from operations and reporting of a net loss, and the expectation that we will 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. Presently, management has no formal plan in place to address this concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we cannot raise the necessary capital to continue as a viable entity, we could experience a material adverse effect on our business and our stockholders may lose some or all of their investment in us. We can provide no assurances that any additional sources of financing will be available to us on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we will be unable to continue to move forward and execute on our business plan.
Because we have a limited operating history, you may not be able to accurately evaluate our operations.
We have had limited operations to date. Therefore, we have a limited history upon which to evaluate the merits of investing in our Company. You should be aware of the difficulties normally encountered by newer companies and the high rate of failure of such enterprises. The likelihood of success must be considered considering the problems, expenses, difficulties, complications and delays encountered in connection with the operations that we may undertake. These potential problems include, but are not limited to, unanticipated problems relating to the ability to generate enough cash flow to operate our business, and additional costs and expenses that may exceed current estimates. We expect to incur significant losses into the foreseeable future. We recognize that if our business is not succeeding, we will not be able to continue business operations. There is limited history upon which to base any assumption as to the likelihood that we will prove successful, and it is doubtful that we will ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
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We have experienced operating losses in the past and we may not generate enough funds to sustain a level of profitability in the future.
Since our inception, we have incurred significant losses and experienced negative operating cash flow. We incurred a net loss of $166,596 and $1,652,199 as of February 28, 2023 and 2022, respectively, and we anticipate that we will continue to incur significant operating losses through the foreseeable future. As a result, we will require additional debt or equity financing to sustain our operations, generate revenue and achieve profitability, and we cannot assure you that we obtain any such financing.
Our profitability is tied to the strength of the companies from whom we provide consulting services, which are subject to general business and macroeconomic conditions beyond our control.
Our profitability will be closely related to the strength of companies from whom we provide consulting services, which can be cyclical in nature and affected by changes in national, state and local economic conditions which are beyond our control. Macroeconomic conditions that could adversely impact the growth of our business and those we consult to include, but are not limited to, economic slowdown or recession, increased unemployment, increased energy costs, reductions in the availability of credit or higher interest rates, increased costs of conducting business, inflation, disruptions in capital markets, declines in the stock market, adverse tax policies or changes in other regulations, lower consumer confidence, lower wage and salary levels, war or terrorist attacks, other pandemics, natural disasters or adverse weather events, or the public perception that any of these events may occur. Unfavorable general economic conditions, such as a recession or economic slowdown, in the United States or other markets we enter and operate within could negatively affect the affordability of, and consumer demand for, our services, which could have a material adverse effect on our business and profitability.
We may never generate enough income to become profitable.
Our ability to generate income from consulting services and become profitable will depend, among other things, upon our ability to successfully prospect for clients, negotiate consulting agreements, become engaged by clients, add value and collect our payment for consulting services rendered. Even if we are able to successfully do these and other things that are within our control, there are numerous other factors, some of which are not within our control, that could impact our ability to generate income or cash flows or be profitable, including those discussed in these risk factors.
We are unable to predict the timing or amount of future cash receipts, or when or whether we will be able to achieve or maintain profitability. Even if we secure consulting agreements as described above, we anticipate incurring significant costs associated with our efforts to achieve or maintain profitability. Further, we may not receive the cash amounts that we expect, or any at all, from any of our current or future consulting agreements.
We expect our Company’s business model to continue to evolve.
As our Company moves forward with its business plans, our Company’s business model may need to evolve. From time to time, we may materially modify aspects of our business model relating to our product and service offerings. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to our business. Such circumstances would have a material adverse effect on the ability of our Company to continue as a going concern, which would harm the business, prospects or operations of the Company and potentially the value of our common stock.
Our business strategy depends on our ability to enter into consulting agreements with healthcare organizations. We may not be able to enter additional contracts in the future or enter into the number of additional contracts that we anticipate would be necessary to support our business model.
Our strategy depends in large part on our ability to benefit from economies of scale. Accordingly, we must actively pursue additional consulting contracts that we intend to enter into in the future, which, as of late, we have not been successfully doing. We are also experiencing significant difficulties entering into these types of contracts. We do not know if future potential clients will agree to enter consulting agreements and we may not be able to attract enough additional contracts. For example, future potential clients may not view our consulting services as an attractive value proposition to them due to any number of factors, including differing expectations of an appropriate purchase price, which may be based on any number of factors. As a result, we may be forced to revise our business model.
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It is difficult to estimate with precision the projected consulting payments under any agreement because such estimation is necessarily based on future events that may or may not occur and that could change based on a number of factors that are hard to control.
Due to the inherent uncertainty in predicting the future, it is difficult to estimate with precision the projected future payments associated with our consulting agreements. These estimations are based on future events that may or may not occur. Additionally, future events change based on several factors that are difficult or impossible to control. As a result, it is difficult to predict an accurate stream of revenue and our competitive position, results of operations, financial condition and cash flows could be materially adversely impacted if we receive less revenue from consulting contracts than estimated.
Acquisitions, partnerships and joint ventures are part of our growth strategy and any acquisitions, partnerships or joint ventures that we make or enter into could disrupt our business and harm our financial condition.
Acquisitions, partnerships and joint ventures are part of our growth strategy. We evaluate, and expect in the future to evaluate, potential acquisitions of, and partnerships or joint ventures with, complementary businesses, services or technologies. We may not be successful in identifying acquisition, partnership, and joint venture targets. In addition, we may not be able to successfully finance or integrate any businesses, services, or technologies that we acquire or with which we form a partnership or joint venture, and we may lose customers as a result of any acquisition, partnership, or joint venture. Furthermore, the integration of any acquisition, partnership, or joint venture may divert management’s time and resources from our core business and disrupt our operations. We may spend time and money on projects that do not increase our revenue or impinge on our current business plans.
Our business may be adversely affected by competitive market conditions and we may not be able to execute our business strategy.
We intend to increase revenue and cash flow over time through a business strategy which requires us, among other things, to enter into consulting agreements with healthcare organizations. We face competition from other consulting firms and may not be successful in securing favorable agreements. Expanding our client base will require sustained management focus, organization and coordination over significant periods of time. The results of our strategy and the success of our implementation of this strategy will not be known for some time in the future. If we are unable to implement our strategy successfully or properly react to changes in market conditions, our financial condition, results of operations and cash flows could be adversely affected.
As of February 28, 2023, we had an aggregate of $78,271 of principal plus $3,177 in accrued interest from outstanding senior secured convertible credit line.
We will be required to repay the aggregate principal amount of our outstanding senior secured convertible credit line, including accrued interest, in cash. Based on our current cash balance and projected net uses of cash in the future, it is highly unlikely that we would be able to repay the aggregate principal amounts at maturity in cash without securing additional capital or other financing. Such additional debt financing may not be available on favorable terms, or at all, and could increase our Company’s debt balance and result in significant expense to our Company. If our Company is unable to raise additional debt financing, we may be forced to raise additional equity financing. Again, such equity financing may not be available on favorable terms, if at all. Management efforts to raise either additional debt or equity financing likely would require substantial time and effort and may further divert management from implementation of our business plans. In the event the Company is unable to raise additional debt or equity financing, we may: (i) have to cease operations, in which case we may file a petition for bankruptcy in U.S. Bankruptcy Court under Chapter 7, whereby a trustee will be appointed to sell off our assets, and the money will be used to pay off our debts in order of their priority. With respect to priority, stockholders, will be behind all of the Company’s secured and unsecured creditors, including the holders of promissory notes; or (ii) file a petition for bankruptcy in U.S. Bankruptcy Court under Chapter 11 to restructure our debt. The Chapter 11 reorganization plan will describe stockholders’ rights and what stockholders can expect to receive, if anything, from the Company. For additional information on our outstanding promissory notes, See “Note 4 – Notes Payable” in the notes to the financial statements appearing elsewhere in this report on Form 10-K.
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Our level of indebtedness and other potential financial obligations may limit our financial flexibility.
Our Company’s indebtedness pursuant to outstanding promissory notes and other potential financial obligations may affect our operations in several ways, including, but not limited to: (i) putting our Company at a competitive disadvantage compared to similar companies that have less debt and financial obligations; and (ii) preventing us from obtaining additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes, or causing us to incur higher costs and include more restrictive covenants for such financing. These factors and other factors that could affect our ability to obtain additional financing, some of which may be beyond our control and could adversely affect our ability to take advantage of strategic opportunities that might otherwise benefit our Company. For additional information on our outstanding promissory notes, See “Note 4 – Notes Payable” in the notes to the financial statements appearing elsewhere in this report on Form 10-K.
Unpredictable events and associated business disruptions could continue to seriously harm our revenues and financial condition, delay our operations, increase our costs and expenses, and impact our ability to raise capital.
Our operations could be subject to unpredictable events, such as earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, hostilities and social unrest, medical epidemics or pandemics such as the COVID-19 outbreak, changes in government policies, and other natural or manmade disasters or business interruptions, for which we are predominantly self-insured. We do not carry insurance for any categories of risk that our business may encounter. The occurrence of any of these business disruptions could seriously harm our operations and financial condition, delay our marketing efforts, and increase our costs and expenses.
The spread of the novel coronavirus, or COVID-19, underscores certain investment risks, such as the severe impact on most economic activity in the United States during 2021 and 2022. The ultimate impact of such unpredictable events on our Company is unknown, but our operations and financial condition could continue to suffer in the event of any of these types of events. Further, any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, results of operations, financial condition and cash flows.
We will need additional capital in the future, which may not be available to us on favorable terms, or at all, and may dilute your ownership of our securities.
We have historically relied on outside financing and cash from operations to fund our operations, capital expenditures and expansion. We will continue to require additional capital from equity or debt financing in the future to fund our operations. We may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financing may place limits on our financial and operating flexibility. If we raise additional funds through issuances of equity, convertible debt securities or other securities convertible into equity, our existing shareholders could suffer significant dilution in their percentage ownership of our Company, and any new securities we issue could have rights, preferences and privileges senior to those of the securities we are offering herein. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited.
We may expand through acquisitions of, or investments in, other companies or through business relationships, all of which may divert our management’s attention, resulting in additional dilution to our shareholders and consumption of resources that are necessary to sustain our business.
We may acquire competing or complementary services, technologies or businesses. Any future acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. We may encounter difficulties assimilating or integrating the acquired businesses, technologies, products, personnel or operations of the acquired companies, 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. Moreover, we cannot assure you that the anticipated benefits of any acquisition, investment or business relationship would be realized or that we would not be exposed to unknown liabilities, nor can we assure you that we will be able to complete any acquisitions on favorable terms or at all.
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If we fail to develop our brand cost-effectively, our business may be adversely affected.
Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful services at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brands. If we fail to successfully promote and maintain our brand or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new operators to the extent necessary to realize a sufficient return on our brand-building efforts, and our business and results of operations could suffer.
The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.
We operate in a highly competitive industry. The market for our services is competitive and rapidly changing, and the barriers to entry are relatively low. We experience competition from large established businesses possessing large, existing customer bases, substantial financial resources and established distribution channels. We expect competition to persist and intensify in the future. Competition could result in reduced sales, reduced margins or the failure of our services to achieve or maintain more widespread market acceptance, any of which could harm our business and our operating results could be harmed. Our principal competitors include any entity or individual providing consulting services, but not limited to business consultants, growth consultants, sales consultants, marketing consultants, distribution consultants and financial consultants.
Our current and potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their offerings. Our current and potential competitors have more extensive customer bases and broader customer relationships than we have. If we are unable to compete with such companies, the demand for our offering could substantially decline.
We incur significant costs complying with our obligations as a reporting issuer, which decreases our profitability.
We file periodic reports with the U.S. Securities and Exchange Commission (“SEC”), including financial statements and disclosure regarding changes in our operations. In order to comply with these requirements, our independent registered public accounting firm will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. The costs charged by these professionals for such services cannot be accurately predicted at this time because factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time and will have a major impact on the amount of time to be spent by our auditors and attorneys. However, we estimate that these costs will exceed $100,000 per year for the next few years. Those fees will be higher if our business volume and activity increases. Those obligations will reduce our resources to fund our operations and may prevent us from meeting our normal business obligations. Compliance costs will be charged to operations and will negatively impact our profitability.
RISKS RELATED TO OUR MANAGEMENT
Because our officers and directors engage in other business activities, they may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail.
Stephen Epstein, our Chief Executive Officer, currently devotes up to 5 hours per week providing management services to us. Presently, he does not possess adequate time to attend to our interests, and is unable to devote sufficient time to the management of our business. The loss of any of our officers or directors could negatively impact our business development.
We are highly dependent on our ability to attract, train and retain consultants.
Our business is highly dependent on our ability to attract, train and retain consultants. In addition, because consultants become more productive as they gain experience, retaining those individuals is very important for our success. If we are unable to attract, train and retain effective consultants, our business, financial condition, cash flows or results of operations could be adversely affected. If we are unable to attract and retain consultants in our business, it could adversely affect our business, financial condition, cash flows and results of operations.
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If we fail to retain our key personnel, we may not be able to achieve any level of growth and our business could suffer.
Our future depends, in part, on our ability to attract and retain key personnel. Our future also depends on the continued contributions of our Stephen Epstein, our Chief Executive Officer who is critical to the management of our business and operations and the development of our strategic direction. Presently, Mr. Epstein does not possess adequate time to attend to our interests, and is unable to devote sufficient time to the management of our business. The permanent loss of the services of our Chief Executive Officer or any other key personnel and the process to replace any of our key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives. Any growth of our business could strain our personnel resources and infrastructure, and if we are unable to implement appropriate controls and procedures to manage growth, we may not be able to successfully implement our business plan.
If we experience a period of rapid growth in our operations, such growth may place, to the extent that we are able to sustain such growth, a significant strain on our management and our administrative, operational and financial reporting infrastructure.
Our success will depend in part on the ability of our senior management to manage growth effectively. To do so, we believe we will need to continue to hire, train and manage new employees or contractors as needed. If our new team members perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new team members, or if we are not successful in retaining our existing employees or contractors, our business may be harmed. To manage any growth of our operations and personnel, we will need to continue to improve our operational and financial controls and update our reporting procedures and systems. The addition of new team members and the capital investments that we anticipate will be necessary to manage our growth will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term. If we fail to successfully manage our growth, we will be unable to execute our business plan.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy or completeness of our financial reports and the market price of our common stock may decline.
We need to improve the design, implementation, and testing of the internal controls over financial reporting requirements. If we are unable to remedy material weaknesses or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of its internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could be negatively affected. We also could become subject to investigations by the Securities and Exchange Commission, or other regulatory authorities, which could require additional financial and management resources.
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. As of February 28, 2023, the initiation of transactions and recording of transactions are performed solely by Stephen Epstein, our Chief Executive Officer.
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We do not have a compensation or an audit committee, so shareholders will have to rely on our directors to perform these functions.
We do not have an audit or compensation committee comprised of independent directors. These functions are performed by the members of our board of directors. Until we have an audit committee, there may be less oversight of management decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of minority shareholders.
Our officers and directors own a controlling interest in our voting stock and investors will not have any voice in our management, which could result in decisions adverse to our general shareholders.
Our officers and directors, in the aggregate, beneficially own or have the right to vote 71.8% of our outstanding common shares on a fully diluted basis. As a result, these shareholders, acting together, have the ability to control substantially all matters submitted to our shareholders for approval including: election of our board of directors; removal of any of our directors, amendment of our certificate of incorporation or by-laws; and adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. As a result of their ownership and positions, our officers and directors collectively can influence all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. The interests of our officers may differ from the interests of the other shareholders, and they may influence decisions with which the other shareholders may not agree. Such decisions may be detrimental to our business operations and they may cause the business to fail in which case you may lose your entire investment.
We rely on third party consultants and other outside advisors for many aspects of our business, which creates additional risk.
We rely on third party consultants and other outside advisors for many aspects of our business, including accounting legal and compliance. If the third parties that we rely on do not perform satisfactorily, our operations could be disrupted, which could result in customer dissatisfaction, damage our reputation, harm our business or reduce the value of our shares.
RISKS RELATED TO OUR SYSTEMS
Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.
We face growing risks and costs related to cybersecurity threats to our data and customer, employee data, including but not limited to:
● | the failure or significant disruption of our operations from various causes, including human error, computer malware, ransomware, insecure software, zero-day threats, or other events related to our critical information technologies and systems |
● | the increasing level and sophistication of cybersecurity attacks, including distributed denial of service attacks, data theft, fraud or malicious acts on the part of trusted insiders, social engineering, or other unlawful tactics aimed at compromising the systems and data of our officers, employees, operators and their customers (including via systems not directly controlled by us, such as those maintained by independent sales agents, joint venture partners and third party service providers) |
● | the reputational and financial risks associated with a loss of data or material data breach (including unauthorized access to our proprietary business information or personal information of our customers, employees and independent sales agents), the transmission of computer malware. |
Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to information technology systems via viruses, worms, and other malicious software, to phishing to advanced and targeted hacking launched by individuals or organizations. These attacks may be directed at the Company, its employees, operators, third-party service providers, joint venture partners and others.
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In the ordinary course of our business, we and our third-party service providers store sensitive data, including our proprietary business information and intellectual property and that of our clients as well as personally identifiable information, sensitive financial information and other confidential information of our employees and customers. Additionally, we increasingly rely on third-party data processing, storage providers, and critical infrastructure services, including cloud solution providers. The secure processing, maintenance and transmission of this information are critical to our operations and with respect to information collected and stored by our third-party service providers, we are reliant upon their security procedures. A breach or attack affecting one of our third-party service providers or partners could harm our business even if we do not control the service that is attacked.
In addition, the increasing prevalence and the evolution of cyber-attacks and other efforts to breach or disrupt our systems or those of our employees, customers, third-party service providers and/or joint venture partners will likely continue to lead, to increased costs to us with respect to preventing, investigating, mitigating and remediating these risks, as well as any related attempted or actual fraud.
Our facilities and systems are vulnerable to natural disasters and other unexpected events and any of these events could result in an interruption of our ability to execute our business operations.
We will depend on the efficient and uninterrupted operations of our third-party data centers and hardware systems. The data centers and hardware systems are vulnerable to damage from earthquakes, tornados, hurricanes, fire, floods, power loss, telecommunications failures and similar events. If any of these events results in damage to third-party data centers or systems, we may be unable to provide our clients with our service until the damage is repaired and may accordingly lose clients and revenues. In addition, subject to applicable insurance coverage, we may incur substantial costs in repairing any damage.
Any significant disruption in service on our website or in our computer systems, or in our customer support services, could reduce the attractiveness of our services and result in a loss of customers.
The satisfactory performance, reliability and availability of our services are critical to our operations, level of customer service, reputation and ability to attract new customers and retain customers. Most of our computing hardware are co-located in third-party hosting facilities. None of the companies who host our systems guarantee that our customers’ access to our products will be uninterrupted, error-free or secure. Our operations depend on their ability to protect their and our systems in their facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity and other environmental concerns, computer viruses or other attempts to harm our systems, criminal acts and similar events. If our arrangements with third-party data centers are terminated, or there is a lapse of service or damage to their facilities, we could experience interruptions in our service as well as delays and additional expense in arranging new facilities. Any interruptions or delays in access to our services, whether as a result of a third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with customers and our reputation. These factors could damage our brand and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause customers to cancel their accounts, any of which could adversely affect our business, financial condition and results of operations.
We do not have a disaster recovery system, which could lead to service interruptions and result in a loss of customers.
We do not have any disaster recovery systems. In the event of a disaster in which our software or hardware are irreparably damaged or destroyed, we would experience interruptions in access to our services. Any or all these events could cause our customers to lose access to our services.
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We rely on third-party computer hardware and software that may be difficult to replace or that could cause errors or failures of our service, which could cause us to suffer a decline in revenues and profitability.
We rely on computer hardware purchased and software licensed from third parties in order to offer our services. This hardware and software may not continue to be available on commercially reasonable terms, or at all. If we lose the right to use any of this hardware or software or such hardware or software malfunctions, our customers could experience delays or be unable to access our services until we can obtain and integrate equivalent technology or repair the cause of the malfunctioning hardware or software. Any delays or failures associated with our services could upset our customers and harm our business.
RISKS RELATED TO OUR SECURITIES
Because we can issue additional shares of common stock, our stockholders may experience dilution in the future.
We are authorized to issue up to 200,000,000 shares of common stock. As of the date of this report on Form 10-K, we will have approximately 21,303,000 shares of common stock issued and outstanding. Our board of directors has the authority to cause us to issue additional shares of common stock without the consent of any of our shareholders. Consequently, you may experience more dilution in your ownership of our securities in the future.
We do not intend to pay any cash dividends on our shares of common stock, so stockholders will not be able to receive a return on their investment unless they can sell their shares.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our shares of common stock. Unless we pay dividends, our stockholders will not be able to receive a return on their investment unless they can sell their shares.
There is no active market for our common stock, which may make it more difficult for you to sell your stock; purchasers of our stock may have difficulty selling their shares.
There is currently no active public trading market for our common stock and an active trading market in our common may not develop or, if developed, may not be sustained. Our common stock is quoted on the OTC Markets (OTC Pink) under the symbol “HCBR.” To date, however, no active public trading market has developed, so purchasers and/or holders of our securities may have difficulty selling their shares should they desire to do so. In the event an active market develops in our securities, it may not be sustained. As a result, you should purchase shares only as a long-term investment, and you must be prepared to hold your shares for an indefinite period.
Financial Industry Regulatory Authority (FINRA) sales practice requirements may limit your ability to buy and sell our shares.
FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares, depressing our share price.
State securities laws may limit secondary trading, which may restrict the states in which, and conditions under which, you can sell the securities sold in this offering.
Secondary trading in our securities will not be possible in any state in the U.S. unless and until the securities are qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in such state. We cannot assure you that we will be successful in registering or qualifying our securities for secondary trading or identifying an available exemption for secondary trading in our securities in every state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the securities in any state, the securities could not be offered or sold to, or purchased by, a resident of that state. If a significant number of states refuse to permit secondary trading in our securities, the market for our securities could be adversely affected.
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We are subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which would likely make it difficult for our stockholders to sell their securities.
Rule 3a51-1 of the Securities Exchange Act of 1934 (“Exchange Act”) establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available to us. This classification could severely and adversely affect any market liquidity for our common stock.
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:
| ● | The basis on which the broker or dealer made the suitability determination; and |
| ● | That the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commission payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of stockholders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock. In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common stock. Our common stock, in all probability, will be subject to such penny stock rules for the foreseeable future and our stockholders will, in all likelihood, find it difficult to sell their shares of common stock.
In the event an active trading market for our common stock develops, the price of our common stock may fluctuate significantly.
In the event an active trading market for our common stock develops, the market price for our common stock could fluctuate significantly for various reasons, many of which are outside our control. Broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to litigation, including class action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
Our Bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
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Our bylaws provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for:
| · | any derivative action or proceeding brought on behalf of our Company; |
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| · | any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, or agent of the Company to the Company or the Company's stockholders; |
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| · | any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the Certificate of Incorporation, or these by-laws; or |
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| · | any action asserting a claim governed by the internal affairs doctrine; |
This provision may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ bylaws and certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any action, a court could find the choice of forum provisions contained in our bylaws to be inapplicable or unenforceable in such action. Additionally, these provisions would not apply to suits brought to enforce a duty or liability created by the Exchange Act, the Securities Act of 1933, as amended (“Securities Act”) or any other claim for which the federal courts have exclusive or concurrent jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to these provisions. Our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our shareholders will not be deemed to have waived our compliance with these laws, rules and regulations.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our corporate headquarters is in Nashville, Tennessee. Substantially all our operating activities are conducted from 400 square feet of office space provided by our CEO at no charge. We believe that additional space may be required as our business expands and believe that we can obtain suitable space as needed.
Item 3. Legal Proceedings.
We may from time to time be involved in routine legal matters incidental to our business; however, we are currently not involved in any litigation, nor are we aware of any threatened or impending litigation.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is quoted on the OTC Markets (OTC Pink) under the symbol “HCBR.” To date, however, no active public trading market has developed. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Holders of Common Equity
As of February 28, 2023, we had approximately 66 stockholders of record of our common stock.
Dividends
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain earnings, if any, to finance the growth and development of our business. We do not expect to pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any financing instruments, provisions of applicable law and other factors the board deems relevant.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not repurchase any of our equity securities during the year ended February 28, 2023.
Equity Compensation Plan Information
Equity Compensation Plan Information
As of our fiscal year ending February 28, 2023
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights |
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| Weighted-average exercise price of outstanding options, warrants and rights |
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| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
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| (a) |
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| (b) |
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| (c) |
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Equity compensation plans approved by security holders |
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| 1,580,000 | (1) |
| $ | 0.57 |
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| 6,420,000 |
|
Equity compensation plans not approved by security holders |
|
| - |
|
|
| - |
|
|
| - |
|
Total |
|
| 1,580,000 |
|
|
|
|
|
|
| 6,420,000 |
|
(1) | Reflects our 2020 Equity Incentive Plan for the benefit of our directors, officers, employees and consultants. We have reserved 8,000,000 shares of common stock for such persons pursuant to that plan. |
Recent Sales of Unregistered Securities
Not Applicable.
Item 6. [Reserved].
| 21 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes appearing elsewhere in this report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties, including those set forth under “Cautionary Statement About Forward-Looking Statements.” Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.” Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this report on Form 10-K.
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.
Results of Operations for the Year Ended February 28, 2023 Compared to the Year Ended February 28, 2022
Revenue
We generated $1,884 of revenues for the year ended February 28, 2023 compared to $28,942 for 2022. Our revenues came from management consulting services performed for customers.
Operating Expenses
Operating expense were $172,250 for the year ended February 28, 2023 compared to $1,662,099 for 2022. The change was attributable to a decrease of $204,305 in professional fees, $377,554 in general and administrative expense and $907,990 in impairment expense in 2023.
Other income (expense)
Other expense was $3,770 for the year ended February 28, 2023 compared to other expense of $19,042 for 2022. The change was attributable to $15,028 increase in gain on settlement of liabilities, which were offset by a $7,784 decrease in interest expense during the year ended February 28, 2023.
Liquidity and Capital Resources
On February 28, 2023, we had cash of $14,192 and we had working capital deficit of $58,722. We have historically funded our operations from proceeds from debt and equity sales. We believe that the cash on hand is sufficient to fund our planned operations into but not beyond the near term. Presently, management has no formal plan in place to address this concern.
We may raise additional capital through the issuance of additional shares of common stock or preferred stock, debt or other acceptable types of financing. If we issue additional shares of common stock in the future, our then-existing stockholders may face substantial dilution.
No assurance can be given that we will obtain access to capital markets at this time or in the future or that adequate financing to satisfy the cash requirements of continuing our business operations 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.
Senior Secured Convertible Credit Line
On July 1, 2022, we issued a secured convertible note up to $100,000. The secured convertible note matures on July 1, 2023 and bears interest at 8% per annum. The convertible note is secured by 11,000,000 shares of the Company’s common stock held by the Company's Chief Executive Officer. In the event of an event of default on the note, at the option of the holder, the note can be converted into shares of the Company’s common stock at the conversion price of $0.01 per share. As of the February 28, 2023, the Company has drawn $78,271 on the convertible note, with accrued interest of $3,177.
| 22 |
| Table of Contents |
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 $51,506 and $280,655 for the years ended February 28, 2023 and 2022, respectively, and mainly included payments made general and administrative expenses, marketing and professional fees to our consultants, attorneys and accountants.
Cash used in investing activities
Net cash provided by investing activities was $32,685 and $189,553 for the years ended February 28, 2023 and 2022, respectively. During the year ended February 28, 2023, the Company received payments of $32,665 related to the note receivable. During the year ended February 28, 2022, the Company issued a $200,000 note receivable and received repayments of $10,447 related to the note receivable.
Cash provided by financing activities
Net cash provided by financing activities was $7,000 and $461,166 for the years ended February 28, 2023 and 2022, respectively. During the year ended February 28, 2023, the Company received proceeds from notes payable, related party of $225,000 and proceeds from advances, related party of $7,000, which were offset with payments on notes payable of $175,000 and payments on notes payable, related party of $50,000. We received net proceeds of $150,000 from capital contributions, related party, $86,166 from the issuance of common stock, $400,000 in proceeds from notes payable, $50,000 in proceeds from notes payable – related party and repaid $225,000 on notes payable during the year ended February 28, 2022.
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.
Off-balance Sheet Arrangements
As of February 28, 2023, we do not have an interest in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K 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.
| 23 |
| Table of Contents |
Contractual Obligations
As of February 28, 2023, we had an aggregate of $78,200 of principal plus $3,177 in accrued interest from outstanding senior secured convertible credit line. See “Note 4 – Notes Payable” in the notes to the financial statements appearing elsewhere in this report on Form 10-K.
JOBS Act Accounting Election
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, exempts an “emerging growth company” such as us from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Critical Accounting Policies and Estimates
Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Financial Statements. 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. See “Note 2 – Summary of Significant Accounting Policies” in the notes to the financial statements appearing elsewhere in this report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
| 24 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data.
Healthcare Business Resources, Inc.
Index to Financial Statements
| 25 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Healthcare Business Resources, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Healthcare Business Resources, Inc. as of February 28, 2023 and 2022, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/
BF Borgers CPA PC (PCAOB ID
We have served as the Company's auditor since 2021
May 30, 2023
| F-1 |
| Table of Contents |
HEALTHCARE BUSINESS RESOURCES | ||||||||
Consolidated Balance Sheets | ||||||||
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| February 28, 2023 |
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| February 28, 2022 |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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Note receivable |
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Total current assets |
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Total Assets |
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Liabilities and Stockholders' Deficit |
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Current Liabilities: |
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Accounts payable |
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Accrued expenses |
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Advance, related party |
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Notes payable |
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Note payable, related party |
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Senior secured convertible credit line |
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Total current liabilities |
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Total Liabilities |
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Commitments and contingencies |
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Stockholders' Deficit: |
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Common stock, $ authorized, |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders' Deficit |
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Total Liabilities and Stockholders' Deficit |
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See accompanying notes to the consolidated financial statements. | ||||||||
| F-2 |
| Table of Contents |
HEALTHCARE BUSINESS RESOURCES | ||||||||
Consolidated Statements of Operations | ||||||||
For the years ended February 28, 2023 and 2022 | ||||||||
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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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Impairment expense |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Gain on settlement of liabilities |
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Interest expense |
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Total other income (expense) |
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Net loss |
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Loss per share - basic |
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Loss per share - diluted |
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Weighted average shares outstanding - basic |
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Weighted average shares outstanding - diluted |
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See accompanying notes to the consolidated financial statements. | ||||||||
| F-3 |
| Table of Contents |
HEALTHCARE BUSINESS RESOURCES | ||||||||||||||||||||||
Consolidated Statements of Stockholders' Deficit | ||||||||||||||||||||||
For the years ended February 28, 2023 and 2022 | ||||||||||||||||||||||
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| Additional |
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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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Common shares and warrants issued for license |
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Stock-based compensation |
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Captial contributions, related party |
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Net loss |
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Balance February 28, 2022 |
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Common shares issued for settlement of note payable, related party |
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Stock-based compensation |
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Net loss |
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Balance February 28, 2023 |
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| $ |
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See accompanying notes to the consolidated financial statements. | ||||||||||||||||||||||
| F-4 |
| Table of Contents |
HEALTHCARE BUSINESS RESOURCES | ||||||||
Consolidated Statements of Cash Flows | ||||||||
For the years ended February 28, 2023 and 2022 | ||||||||
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| February 28, 2023 |
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| February 28, 2022 |
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Cash Flows from Operating Activities: |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
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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Impairment expense |
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Gain on settlement of liabilities |
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Changes in operating assets and liabilities: |
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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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Issuance of note receivable |
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Payment received from note receivable |
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Net cash provided by (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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Payments on notes payable |
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Proceeds from notes payable, related party |
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Payments on notes payable, related party |
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Proceeds from advances, related party |
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Proceeds from capital contributions, 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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| $ |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
| $ |
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| $ |
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Cash paid for income taxes |
| $ |
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| $ |
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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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Common shares issued for settlement of note payable, related party |
| $ |
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| $ |
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Expenses paid with senior secured convertible credit line |
| $ |
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| $ |
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Capitalization of ROU asset and liability - operating |
| $ |
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| $ |
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See accompanying notes to the consolidated financial statements. | ||||||||
| F-5 |
| Table of Contents |
HEALTHCARE BUSINESS RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 28, 2023 and 2022
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.
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.
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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“US GAAP”), and, as such, include amounts based on judgments, estimates, and assumptions made by management that affect the reported amounts of assets and liabilities and 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. The Company is in the development stage, which is defined as an entity devoting substantially all of its efforts to establishing a new business and for which its primary line of business has not yet begun. Following is a description of the more significant accounting policies followed by the Company:
Basis of Presentation
The basis of accounting applied is United States generally accepted accounting principles (US GAAP).
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. During the years ended February 28, 2023 and 2022, the Company evaluated long lived assets for impairment and recorded impairment losses of $
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. There were no cash equivalents as of February 28, 2023 and 2022.
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; |
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| · | Identification of the performance obligation within the respective contract, which is the delivery of service; |
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| · | Determination of the transaction price for each performance obligation in the respective contract; |
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| · | Allocation of the transaction price to each performance obligation; and |
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| · | 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 February 28, 2023, 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 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.
Income Taxes
Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the Enactment date. A valuation allowance is established for deferred tax assets that, based on management’s evaluation, are not expected to be realized.
Tax benefits of uncertain tax positions are recorded only where the position is “more likely than not” to be sustained based on their technical merits. The amount recognized is the amount that represents the largest amount of tax benefit that is greater than 50% likely of being ultimately realized. A liability is recognized for any benefit claimed or expected to be claimed, in a tax return in excess of the benefit recorded in the financial statements, along with any interest and penalty (if applicable) in such excess. The Company has no uncertain tax positions as of February 28, 2023.
Fair value of Financial Instruments
The company’s financial instruments consist primarily of cash, accounts receivable and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature or carry interest rates that approximate market rate.
Basic and Diluted Loss Per Share
Basic loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. Accordingly, the number of weighted average shares outstanding, as well as the amount of net loss per share are presented for basic and diluted per share calculations for the years ended February 28, 2023 and 2022, reflected in the accompanying statements of operations. As of February 28, 2023 and 2022, the Company’s potentially dilutive shares and options, which were not included in the calculation of net loss per share, included warrants to purchase
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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 financial statements.
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.
Pursuant to the Option, HBRP shall arrange for an unsecured loan of up to $
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 $
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NOTE 4. NOTES PAYABLE AND SENIOR SECURED CREDIT LINE
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 $
Senior Secured Convertible Credit Line
On July 1, 2022, the Company entered a secured convertible note up to $
NOTE 5. EQUITY
Common stock
For the year ended February 28,2022
During year ended February 28, 2022, we issued (i)
During the year ended February 28, 2022, the Company issued
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On June 18, 2021, the Company issued to UPlus
During the year ended February 28, 2022, the Company received $
Share Surrender Agreement
On October 5, 2021, the Company entered into a share surrender agreement, in consideration of $10.00 and other good and valuable consideration, a stockholder surrendered
Incentive Stock Options
For the year ended February 28,2023
During the year ended February 28, 2023, the Company recognized $
For the year ended February 28,2022
During the year February 28, 2022, the Board of Directors approved grants of
During the year ended February 28, 2022, the Company recognized $
The following table summarizes the stock option activity for the years ended February 28, 2023 and 2022:
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| Weighted Average |
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| Number of Options |
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| Exercise Price Per Share |
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Outstanding at February 28, 2021 |
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| $ |
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Granted |
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Exercised |
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| - |
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Forfeited and expired |
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| ( | ) |
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Outstanding at February 28, 2022 |
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Granted |
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| - |
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Exercised |
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| - |
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Forfeited and expired |
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| - |
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Outstanding at February 28, 2023 |
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| $ |
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As of February 28, 2023, 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 years ended February 28, 2023 and 2022:
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| Weighted Average |
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| Number of Warrants |
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| Exercise Price Per Share |
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Outstanding at February 28, 2021 |
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| - |
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| $ |
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Granted |
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Exercised |
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| - |
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Forfeited and expired |
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| - |
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Outstanding at February 28, 2022 |
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Granted |
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| - |
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Exercised |
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| - |
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Forfeited and expired |
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Outstanding at February 28, 2023 |
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| $ |
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As of February 28, 2023, the outstanding stock warrants have a weighted average remaining term of
The aggregate fair value of the options and warrants measured during the years ended February 28, 2022 were calculated using the Black-Scholes option pricing model based on the following assumptions:
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| 2022 |
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Expected life (years) |
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Volatility (1) |
| % | ||
Dividend yield |
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Risk free interest rate |
| % | ||
(1) The Company used a peer group to estimate volatility
NOTE 6. INCOME TAXES
The Company is subject to United States federal income taxes at an approximate rate of
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| Year Ended |
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| Year Ended |
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| February 28, 2023 |
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| February 28, 2022 |
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Income tax benefit computed at the statutory rate |
| $ |
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| $ |
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Non-deductible expenses |
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| ( | ) |
Change in valuation allowance |
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| ( | ) |
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| ( | ) |
Provision for income taxes |
| $ |
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| $ |
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Significant components of the Company’s deferred tax assets after applying enacted corporate income tax rates are as follows:
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| As of |
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| As of |
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| February 28, 2023 |
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| February 28, 2022 |
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Deferred income tax assets |
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Net operating losses |
| $ |
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| $ |
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Valuation allowance |
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Net deferred income tax assets |
| $ |
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| $ |
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The Company has an operating loss carry forward of approximately $
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company is not aware of any other commitments or contingencies that would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
NOTE 8. 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 9. LEASE
On July 1, 2021,
NOTE 10. RELATED PARTY TRANSACTIONS
Capital Contributions
During the year ended February 28, 2022, the Company received $
Advance – Related Party
During the year ended February 28, 2023 the Company received $
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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 $
On May 11, 2022, the Company issued to RSET Investments QOZB, LLC, a related party, a promissory note in the aggregate
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
None.
Item 9A. 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 our disclosure controls and procedures as of February 28, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost- benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of February 28, 2023, our principal executive officer/principal financial officer concluded that, as of such date, our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting, which is identified below, which we view as an integral part of our disclosure controls and procedures.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of February 28, 2023 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework- 2013. Based on its evaluation, our management concluded that the following are material weaknesses in our internal control over financial reporting:
| · | We do not have written documentation of our internal control policies and procedures. |
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| · | 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.
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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.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit our Company to provide only management’s attestation in this Annual Report.
Changes in Internal Control Over Financial Reporting.
No change in our Company’s internal control over financial reporting occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not Applicable
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information about our Executive Officer and Directors
The following table sets forth the name, age and position of each director and executive officer of the Company:
Name |
| Age |
| Title |
| Held Position Since |
Stephen Epstein |
| 41 |
| Chief Executive Officer, President, Chief Financial Officer, Principal Accounting Officer, Director |
| September 2019 |
Howard T. Wall, III |
| 64 |
| Director |
| May 2020 |
The following information sets forth the backgrounds and business experience of the directors and executive officer.
Stephen Epstein has been Director, Chief Executive Officer, President, Chief Financial Officer and Principal Accounting Officer since September 2019. Mr. Epstein is also a Director of CalSouth Corp, a real estate development company, since March 2016, Manager for the Realiste Fund, LP, a private equity fund, since February 2019 and Managing Member of DollarCamp C&B, LLC, a publishing and training company since 2009. Mr. Epstein has a B.A. in International Relations from The University of Southern California and is a Certified Commercial Investment Member (CCIM). Mr. Epstein’s qualifications to serve on our board of directors include his knowledge of our Company and his leadership at our Company.
Howard T. Wall, III has been an advisor to our Company since September 2019 and a member of our board of directors since May 2020. Mr. Wall has been an independent healthcare attorney and business advisor since January 2019. From June 2011 to December 2018, he served as the Executive Vice President, General Counsel, Chief Administrative Officer and Secretary of Regional Care Hospital Partners (d/b/a RCCH Healthcare Partners). Mr. Wall received a B.A. degree in history and social science from Trevecca Nazarene University in 1980 and received a J.D. degree from Washington & Lee University School of Law in 1983. Mr. Walls qualifications to serve on our board of directors include his knowledge of our Company, the healthcare services industry and his leadership at our Company.
Family Relationships
None.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. To the best of our knowledge, based solely upon a review of Forms 3 and 4 and amendments thereto furnished to our Company during its most recent fiscal year and Forms 5 and amendments thereto furnished to our Company with respect to its most recent fiscal year, and any written representation referred to in paragraph (b)(1) of Item 405 of Regulation S-K, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements with the following exceptions: Stephen Epstein failed to file a Form 5 related to a small acquisition under Rule 16a-6 during 2022.
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Code of Ethics
Our Company has adopted a Code of Business Conduct and Ethics that applies to all of the Company’s employees, including its principal executive officer and principal financial officer. A copy of our Code of Business Conduct and Ethics is attached as Exhibit 14.1 to this Form 10-K and is available for review on our Company’s website www.healthcarebusinessresources.com. The Company intends to disclose any changes in or waivers from its Code of Business Conduct and Ethics by posting such information on its website.
Changes to Director Nomination Procedures
None.
Nominating Committee
Our Board of Directors does not have a nominating committee. This is due to our development stage and smaller sized Board of Directors. Instead of having such a committee, our entire Board of Directors historically has searched for and evaluated qualified individuals to become nominees for membership on our Board of Directors.
Audit Committee
Our Company does not have a separately designated standing audit committee in place; our Company’s entire Board of Directors has served, and currently serves, in that capacity. This is due to our development stage and small executive management team. Our Board of Directors will continue to evaluate, from time to time, whether a separately designated standing audit committee should be put in place. We do not have an audit committee financial expert as that term is defined by the rules promulgated by the Securities and Exchange Commission. We currently have limited revenues and our Company does not carry a sufficient amount of directors and officer’s insurance, which makes it difficult for us to find candidates willing to serve on our board of directors, especially independent directors to sit on an audit committee. If we are able to generate sufficient revenues in the future, then we will likely obtain a sufficient amount of directors and officer’s insurance, retain independent directors and form a separately designated standing audit committee and other applicable committees. Neither Mr. Epstein nor Mr. Wall is “independent” within the meaning of Rule 10A-3 under the Exchange Act and the NASDAQ Stock Market Rules for Audit Committee purposes.
Term of office
The term of office of each director of the Company ends at the next annual meeting of the Company's stockholders or when such director's successor is elected and qualifies. Each executive officer serves at the discretion of our board of directors and holds office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.
Involvement in certain legal proceedings
During the past ten years, none of our directors, officers, greater-than-ten percent stockholders or promoters have been involved in any of the legal proceedings described in paragraph (f) of Item 401 of Regulation S-K.
Item 11. Executive Compensation
Summary Compensation Table
Stephen Epstein is our Chief Executive Officer, President and Chief Financial Officer and sole named executive officer. For the fiscal years ended February 28, 2023 and 2022, no compensation was awarded to, earned by, or paid to Mr. Epstein as an executive officer. See “Employee, Severance, Separation and Change in Control Agreements” below.
Employee, Severance, Separation and Change in Control Agreements
Stephen Epstein. Mr. Epstein is our Chief Executive Officer, President and Chief Financial Officer. Under the terms of our July 22, 2020, letter agreement with Mr. Epstein, he is not paid a salary but is entitled to reimbursement of reasonable business expenses. He does not have a non-competition agreement with the Company; but is not separately engaged, nor does he anticipate being separately engaged, in any competitive businesses.
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Option Exercises and Stock Vested
No stock options, SARs and similar instruments were exercised, and no stock, including restricted stock, restricted stock units and similar instruments vested, by or for any of our named executive officer during the last completed fiscal year.
Pension, retirement or similar benefit plans
There are no annuity, pension or retirement benefits proposed to be paid to the officer or director or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the Company or any of its subsidiaries, if any.
Outstanding Equity Awards
There are no outstanding equity awards for the most recent fiscal period ended February 28, 2023.
Potential Payments Upon Termination or Change In Control
None.
Director Compensation
No compensation was paid to our directors during our February 28, 2023 fiscal year. There are no formal or informal arrangements or agreements to compensate directors for services provided as a director.
Compensation Policies and Practices as They Relate to Our Risk Management
No risks arise from our Company’s compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on our Company.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security ownership of certain beneficial owners and management.
The following table sets forth, as of May 30, 2023, the names, addresses, amount and nature of beneficial ownership and percent of such ownership of (i) each person or group known to our Company to be the beneficial owner of more than five percent (5%) of our common stock; and (ii) each of our officers and directors, and officers and directors as a group:
|
| Shares Beneficially Owned |
| |||||
Name and Address of Beneficial Owner (1)(2) |
| Number |
|
| Percent (3)(4) |
| ||
5% Stockholders |
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|
|
|
|
| ||
Meraki Partners LLC (5) |
|
| 3,500,000 |
|
|
| 16.4 | % |
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Directors and Executive Officers |
|
|
|
|
|
|
|
|
Stephen Epstein, Chief Executive Officer, President, Chief Financial Officer, Secretary and Director (6) |
|
| 14,016,000 |
|
|
| 65.8 | % |
Howard T. Wall, III, Director(7) |
|
| 1,270,000 |
|
|
| 6.0 | % |
All executive officers and directors as a group (2 persons) |
|
| 15,286,000 |
|
|
| 71.8 | % |
________________
(1) | As of May 30, 2023, such holders had the sole voting and investment power with respect to the voting securities beneficially owned by them, unless otherwise indicated herein. Includes the person's right to obtain additional shares of common stock within 60 days of July 1, 2022. |
(2) | In care of the Company at 718 Thompson Lane, Suite 108-273, Nashville, Tennessee 37204. |
(3) | Based on 21,303,000 shares of common stock outstanding. |
(4) | If a person listed on this table has the right to obtain additional shares of common stock within 60 days from the Record Date, the additional shares are deemed to be outstanding for the purpose of computing the percentage of class owned by such person, but are not deemed to be outstanding for the purpose of computing the percentage of any other person. |
(5) | Joel Arberman is the Managing Member of Meraki Partners, LLC and has sole voting and investment power over these securities. |
(6) | Does not include 450,000 shares of common stock owned by RSET Investments QOZB, LLC, which is owned and controlled by Robert Epstein. Stephen Epstein holds a Power of Attorney on behalf of Robert Epstein. |
|
|
(7) | Includes 520,000 shares of common stock and options to purchase up to 750,000 shares of common stock. |
We are not aware of any arrangements that could result in a change of control.
Securities Authorized for Issuance under Equity Compensation Plans
Information regarding our compensation plans under which our equity securities are authorized for issuance can be found in Part II –Item 5 of this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Transactions with Related Persons
During the year ended February 28, 2023:
| · | The Company received $7,000 in advances from Stephen Epstein, Chief Financial Officer of the Company. |
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| · | On May 11, 2022, the Company issued to RSET Investments QOZB, LLC, a related party, a promissory note in the aggregate principal amount of $225,000 (the “$225,000 Promissory Note”). Stephen Epstein, the Company’s Chief Executive Officer, holds a Power of Attorney on behalf of Robert Epstein, who owns and controls RSET Investments QOZB, LLC. The principal amount of $225,000 plus all interest under the $225,000 Promissory Note will be due and payable on December 31, 2023. Interest on the $225,000 Promissory Note will accrue at the greater of rate of 2.0% per annum or the long-term adjusted applicable federal rates for the current month, beginning on the date the principal amount is received by the Company until the principal amount and all accrued but unpaid interest shall have been paid. The $225,000 Promissory Note is an unsecured debt obligation of the Company. On June 21, 2022, the Company agreed to convert the $225,000 promissory note and interest of $530 into 450,000 shares of the Company’s common stock. On July 13, 2022, the Company’s board approved the issuance of the 450,000 shares of common stock. Subsequent to November 30, 2022, the Company issued 450,000 shares to RSET Investments QOZB, LLC. |
Policies and Procedures for Related-Party Transactions
Our Company does not have any formal written policies or procedures for related party transactions, however in practice, our board of directors reviews and approves all related party transactions and other matters pertaining to the integrity of management, including potential conflicts of interest and adherence to standards of business conduct. We have no independent directors on our board of directors.
| 31 |
| Table of Contents |
Director Independence
Although we do not currently trade on the NASDAQ or any other trading medium, our board of directors has reviewed each of the Directors’ relationships with the Company in conjunction with NASDAQ Listing Rule 5605(a)(2) that provides that an “independent director” is ‘a person other than an executive officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.’ Our board of directors has affirmatively determined that none of our directors are independent directors that are independent of management or free of any relationship that would interfere with their independent judgment as members of our board of directors. The following members of our board of directors, Stephen Epstein, Kenneth Hawkins and Howard T. Wall, III are not independent directors pursuant to the standards described above.
Item 14. Principal Accounting Fees and Services
The following table represents aggregate fees billed to the Company for the fiscal years ended February 28, 2023 and February 28, 2022 by the Company’s independent registered public accounting firms. The aggregate fees billed for the fiscal year ended February 28, 2023 and 2022 were from BF Borgers CPA PC:
|
| 2023 |
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| 2022 |
| ||
Audit Fees |
| $ | 25,000 |
|
| $ | 25,000 |
|
Audit Related Fees |
|
| - |
|
|
| - |
|
Tax Fees |
|
| - |
|
|
| - |
|
All Other Fees |
|
| - |
|
|
| - |
|
Total |
| $ | 25,000 |
|
| $ | 25,000 |
|
Audit Fees are the aggregate fees billed during the years ended February 28, 2023 and 2022 for professional services rendered by the Company’s independent registered public accounting firms for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-Q or services that are normally provided by the Company’s independent registered public accounting firms in connection with statutory and regulatory filings or engagements.
Audit-Related Fees are the aggregate fees billed during the years ended February 28, 2023 and 2022 for assurance and related services rendered by the Company’s independent registered public accounting firms that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the category Audit Fees described above.
Tax Fees are the aggregate fees billed during the years ended February 28, 2023 and 2022 for tax compliance services rendered by the Company’s independent registered public accounting firms.
All Other Fees are the aggregate fees billed during the years ended February 28, 2023 and 2022 for products and services provided by the Company’s independent registered public accounting firms, other than the services reported in the Audit Fees, Audit-Related Fees, and Tax Fees categories above.
Audit Committee Pre-Approval Policies.
All the services performed by the Company’s independent registered public accounting firms that are described above were pre-approved by the Company’s Audit Committee. The Audit Committee pre-approves all audit and permissible non-audit services on a case-by-case basis.
None of the hours expended on the Company’s independent registered public accounting firms’ engagement to audit the Company’s financial statements for the years ended February 28, 2023 and February 28, 2022, were attributed to work performed by persons other than the Company’s independent registered public accounting firms’ full-time, permanent employees.
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| Table of Contents |
PART IV
Item 15. Exhibits, Financial Statement Schedules
| (a) | The following documents are filed or furnished as part of this Form 10-K: |
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| 1. | Financial Statements. Reference is made to the Index to Financial Statements under Item 8, Part II hereof. |
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| 2. | Financial Statement Schedules. The Financial Statement Schedules have been omitted either because they are not required or because the information has been included in the financial statements or the notes thereto included in this Annual Report on Form 10-K. |
| (b) | The following exhibits are filed as part of this report. |
| 33 |
| Table of Contents |
EXHIBIT INDEX
SEC Reference Number |
| Title of Document |
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| Incorporated by reference to Company’s Form 8-K filed on 06/23/21 | ||
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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 10-K filed on 06/7/2021 | ||
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| Incorporated by reference to Company’s Form 8-K filed on 07/6/22 | ||
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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 S-1 Registration Statement filed on 09/22/2020 | ||
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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 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 | |
|
| 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 09/30/2021 | ||
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| Incorporated by reference to Company’s Form 8-K filed on 06/23/21 | ||
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| Incorporated by reference to Company’s Form 8-K filed on 06/23/21 | ||
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| Incorporated by reference to Company’s Form 10-Q filed on 10/25/21 | ||
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| Incorporated by reference to Company’s Form 10-K filed on 7/8/22 | ||
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| Incorporated by reference to Company’s Form 10-K filed on 7/8/22 | ||
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| Incorporated by reference to Company’s Form 8-K filed on 07/6/22 | ||
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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 8-K filed on 12/23/21 | ||
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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 Annual Report on Form 10-K |
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104 |
| Cover Page Interactive Data File |
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Item 16. 10-K Summary
None.
| 34 |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HEALTHCARE BUSINESS RESOURCES, INC., Registrant | ||
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Date: May 30, 2023 | By: | /s/ Stephen Epstein | |
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| Stephen Epstein |
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| Chief Executive Officer and Chief Financial Officer (Principal Executive and Financial Officer) |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.
Signature |
| Title |
| Date |
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/s/ Stephen Epstein |
| Chief Executive Officer, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, Director |
| May 30, 2023 |
Stephen Epstein |
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/s/ Howard T. Wall, III |
| Director |
| May 30, 2023 |
Howard T. Wall, III |
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| 35 |
| Table of Contents |
EXHIBIT 21.1
SUBSIDIARIES OF HEALTHCARE BUSINESS RESOURCES INC.
HBR Business Development, LLC - incorporated in Delaware on January 21, 2020.
UPlus Health, LLC, a Delaware limited liability company, incorporated in Delaware on June 15, 2021.
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Stephen Epstein, Chief Executive Officer of Healthcare Business Resources Inc., certify that:
| 1. | I have reviewed this annual report on Form 10-K of Healthcare Business Resources Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 30, 2023 |
|
| /s/ Stephen Epstein |
|
| Stephen Epstein, |
|
| Chief Executive Officer |
|
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Stephen Epstein, Chief Financial Officer of Healthcare Business Resources Inc., certify that:
| 1. | I have reviewed this annual report on Form 10-K of Healthcare Business Resources Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 30, 2023 |
|
| /s/ Stephen Epstein |
|
| Stephen Epstein, |
|
| Chief Financial Officer |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Healthcare Business Resources Inc. (the "Company") for the year ended February 28, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Stephen Epstein, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that;
| (1) | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
May 30, 2023
| /s/ Stephen Epstein |
|
| Stephen Epstein, |
|
| Chief Executive Officer |
|
| Chief Financial Officer |
|