Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2020 | May 13, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Health-Right Discoveries, Inc. | |
Entity Central Index Key | 0001537663 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Incorporation, State or Country Code | FL | |
Entity File Number | 333-206839 | |
Entity Interactive Data Current | Yes | |
Entity Reporting Status Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 22,869,191 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
CURRENT ASSETS: | ||
Cash | $ 2,067,432 | $ 2,242,013 |
Accounts receivable, net | 40,416 | 52,281 |
Inventories | 20,394 | 10,735 |
Prepaid and other assets | 5,168 | 14,433 |
Total Current Assets | 2,133,410 | 2,319,462 |
Property and equipment, net | 22,618 | 23,871 |
Right of use asset | 22,935 | 25,001 |
Intangible assets, net | 2,138,710 | 2,230,122 |
Goodwill | 3,313,226 | 3,313,226 |
TOTAL ASSETS | 7,630,899 | 7,911,682 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | 1,631,521 | 1,388,505 |
Current portion of right of use liability | 8,291 | 8,040 |
Current Portion-notes payable | 2,500,000 | 2,500,000 |
Current portion - notes payable, net of discounts of $82,224 and $123,336 March 31, 2020 and December 31, 2019, respectively | 5,222,276 | 5,181,164 |
Total Current Liabilities | 9,362,088 | 9,077,709 |
LONG-TERM LIABILITIES: | ||
Right of use liability, net of current portion | 14,585 | 16,784 |
Deferred tax liability | 212,882 | 364,882 |
Total Long-term Liabilities | 227,467 | 381,666 |
Total Liabilities | 9,589,555 | 9,459,375 |
STOCKHOLDERS' DEFICIENCY | ||
Preferred Stock, .001 par value, 5,000,000 shares authorized No shares issued and outstanding March 31, 2020 and December 31, 2019, respectively | ||
Common Stock, .001 par value, 100,000,000 shares authorized 22,869,191 shares issued and outstanding March 31, 2020 and December 31, 2019, respectively | 22,869 | 22,869 |
Additional Paid in Capital | 1,117,967 | 1,117,967 |
Accumulated Deficit | (3,099,492) | (2,688,529) |
Total Stockholders' Deficiency | (1,958,656) | (1,547,693) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY | $ 7,630,899 | $ 7,911,682 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Notes payable, related party discounts current | $ 82,224 | $ 123,336 |
Preferred Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred Stock, authorized | 5,000,000 | 5,000,000 |
Preferred Stock, issued | ||
Preferred Stock, outstanding | ||
Common Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common Stock, authorized | 100,000,000 | 100,000,000 |
Common Stock, issued | 22,869,191 | 22,869,191 |
Common Stock, outstanding | 22,869,191 | 22,869,191 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Revenue | $ 382,275 | $ 1,044,009 |
Cost of Revenue | 50,878 | 166,528 |
Gross Profit | 331,397 | 877,481 |
Operating Expenses | ||
General and administrative | 364,314 | 558,665 |
Amortization and depreciation | 95,574 | 121,135 |
Total operating expenses | 459,888 | 679,800 |
Income (loss) from operations | (128,491) | 197,681 |
Other Expenses | ||
Interest expenses | 434,472 | 240,984 |
Total other expenses | 434,472 | 240,984 |
Loss before income tax benefit | (562,963) | (43,303) |
Income tax benefit | 152,000 | 11,136 |
NET LOSS | $ (410,963) | $ (32,167) |
Loss per common share (in dollars per share) | $ (0.02) | $ 0 |
Weighted average common shares outstanding - basic and diluted (in shares) | 22,869,191 | 22,869,191 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
COMMON STOCK [Member] | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||
Balance, beginning | $ 22,869 | $ 22,869 |
Balance, beginning (in shares) | 22,869,191 | 22,869,191 |
Balance, ending | $ 22,869 | $ 22,869 |
Balance, ending (in shares) | 22,869,191 | 22,869,191 |
Additional Paid-In Capital [Member] | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||
Balance, beginning | $ 1,117,967 | $ 1,117,967 |
Balance, ending | 1,117,967 | 1,117,967 |
Accumulated Deficit [Member] | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||
Balance, beginning | (2,688,529) | (1,209,611) |
Adoption of ASU 2016-02 | (18,254) | |
Net (loss) | (410,963) | (32,167) |
Balance, ending | (3,099,492) | (1,260,032) |
Balance, beginning | (1,547,693) | (68,775) |
Adoption of ASU 2016-02 | (18,254) | |
Net (loss) | (410,963) | (32,167) |
Balance, ending | $ (1,958,656) | $ (119,196) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
OPERATING ACTIVITIES: | ||
Net loss | $ (410,963) | $ (32,167) |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation expense | 1,253 | 1,942 |
Amortization expenses | 91,412 | 116,284 |
Right of use liability amortization | (775) | |
Operating lease amortization | 118 | |
Non-cash interest | 41,112 | 41,112 |
Deferred income tax benefit | (152,000) | (11,137) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 11,865 | 28,641 |
Inventories | (9,659) | 11,427 |
Prepaid and other assets | 9,265 | (26,070) |
Accounts payable and accrued expenses | 243,016 | 134,758 |
Accrued salary to related party | (50,000) | |
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (174,581) | 214,015 |
(DECREASE) INCREASE IN CASH | (174,581) | 214,015 |
CASH - BEGINNING OF PERIOD | 2,242,013 | 2,149,738 |
CASH - END OF PERIOD | 2,067,432 | 2,363,753 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | $ 170,960 | $ 164,156 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 1 – Summary of Significant Accounting Policies Health-Right Discoveries, Inc. (“the Company”) was formed under the laws of the State of Florida on October 12, 2011 under the name Four Plex Partners, Inc. and subsequently changed its name to Health-Right Discoveries, Inc. on March 22, 2012. The Company’s primary business was to develop and market an innovative portfolio of both prescription nutritional, OTC monograph and natural products that primarily focus on factors relating to stress-induced conditions and diseases. On September 29, 2017, pursuant to a Securities Purchase Agreement dated August 17, 2017, the Company acquired (the “ Acquisition CCI SCLLC In-Office Dispensing Program CCI offers and provides administrative services and billing services to physician practices (each a “ Practice Practices OTC Products Prescription Medications SCLLC offers OTC Products to Practices that desire to make such products available to patients in the Practice’s office through participation in the OTC Program. SCLLC is not a compounding pharmacy, and neither CCI nor SCLLC is involved in creating topicals with compounding pharmacies. SCLLC also assists the Practices in ordering Prescription Medications directly from licensed pharmaceutical wholesalers and oversees the sale and distribution of Prescription Medications to the Practices. SCLLC does not sell any Prescription Medications to Practices and does not profit from the sale of such medications. The significant accounting policies of the Company were described in Note 2 to the audited consolidated financial statements included in the Company’s 2019 Annual Report on Form 10-K. There have been no significant changes in the Company’s significant accounting policies for the three months ended March 31, 2020. Basis of Presentation Principles of Consolidation The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Therefore, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statement and notes thereto included in the 2019 Form 10-K for the year ended December 31, 2019. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. Certain prior period amounts have been reclassified to conform to the current presentation. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. Cash and cash equivalents The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. Concentration of Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its principal cash balances in various financial institutions. These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At March 31, 2020 and December 31, 2019, $1,367,531 and $1,289,897 were in excess of the FDIC insured limit, respectively. Accounts Receivable Accounts receivable are stated at the amount the Company expects to collect from customers. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management has rewarded an allowance for doubtful accounts in the amounts of $4,660 and $5,040 at March 31, 2020 and December 31, 2019 respectively. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of the Company’s customers was to deteriorate and adversely affecting their ability to make payments, additional allowances would be required. Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU and all subsequently issued clarifying ASUs replaced most existing revenue recognition guidance in U.S. GAAP. The ASU also required expanded disclosures relating to the nature amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new standard effective January 1, 2018, the first day of the Company’s fiscal year. For these reasons, the adoption of this ASU did not have a significant impact on the Company’s financial statements. Effective January 1, 2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers. The revenue recognition policies as enumerated below reflect the Company’s accounting policies effective January 1, 2018, which did not have a materially different financial statement result than what the results would have been under the previous accounting policies for revenue recognition. CCI’s revenue results from the consulting services agreements, which included providing services to physicians for billing insurance companies. The Company has determined the performance obligations in these consulting service agreements relate to the satisfaction of billing the insurance company on behalf of the physicians. CCI remits billings to insurance companies on behalf of the physicians, collect the proceeds and remits an agreed upon percentage amount to the physician. The amounts reported as revenue are recorded net of amounts remitted. The Company follows Staff Accounting Bulletin (“SAB”) No. 104, which states that the revenue is not earned until the company has been paid by the insurance company at which time it becomes realized or realizable. SCLLC’s revenue from the sale of products are recognized when the sale is consummated, and title is transferred. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in the sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. As such, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606. The following tables disaggregate revenue by major source for the three months ended March 31, 2020 and 2019: Three Months Ended March 31, 2020 Ancillary Program OTC and Prescription Medication Corporate (1) Total Product Sales $ — $ 76,587 $ — $ 76,587 Consulting Services 305,688 — — 305,688 Total Revenue $ 305,688 $ 76,587 $ — $ 382,275 Three Months Ended March 31, 2019 Ancillary Program OTC and Prescription Medication Corporate (1) Total Product Sales $ — $ 221,123 $ — $ 221,123 Consulting Services 822,886 — — 822,886 Total Revenue $ 822,886 $ 221,123 $ — $ 1,044,009 (1) The Company’s corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription. Inventories Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, or net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their net realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations. Based on management’s estimate, there was no obsolete inventory at March 31, 2020 and December 31, 2019. Property and Equipment Property and equipment are stated at cost. Expenditures for additions are capitalized, repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows: March 31, December 31, Machinery and equipment – 7 years $ 44,497 $ 44,497 Accumulated depreciation (21,879 ) (20,626 ) Total property and equipment $ 22,618 $ 23,871 Intangible Assets Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” Intangible assets are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified. The Company calculates fair value of our intangible assets as the present value of estimated future cash flows the Company expects to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, The Company uses estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). During the third quarter 2019, the Company reviewed its customer lists and impaired approximately 50% of its value, or $1,061,200. Goodwill Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles—Goodwill and Other,” In January 2017, the FASB issued ASU 2017-04 that eliminates “step 2” from the goodwill impairment test. The Company made the election to early adopt ASU 2017-04 as of January 1, 2018 and the standard was applied on a prospective basis, as required. In accordance with ASC 350-25-35-3, “An entity may first assess qualitative factors, as described in paragraphs 350-20-35-3A through 35-3G, to determine whether it is necessary to perform the quantitative goodwill impairment test.” Management reviewed the following qualitative factors around its goodwill and believes that the fair value of its investment in the Company exceeds its carrying amount at March 31, 2020 and December 31, 2019. The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of December 31 and whenever events or changes in circumstances indicate carrying amount may not be recoverable. When assessing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a two-step impairment test. If the Company concludes otherwise, then no further action is taken. The Company also has the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit. If the carrying amount of a reporting unit is in excess of its fair value, an impairment may exist, and the Company must perform the second step of the impairment analysis to measure the amount of the impairment loss, by allocating the reporting unit’s fair value to its assets and liabilities other than goodwill, comparing the carrying amount of the goodwill to the resulting implied fair value of the goodwill, and recording an impairment charge for any excess. Stock-based compensation The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the fair value of the award is calculated on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for common shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, the fair value of the award on the date of grant is calculated in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. Income Taxes The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. 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 the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized. ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding, noted above. Accounting for Business Combinations In accordance with ASC Topic 805, “Business Combinations,” when accounting for business combinations we are required to recognize the assets acquired, liabilities assumed, contractual contingencies, non-controlling interests and contingent consideration at their fair value as of the acquisition date. These items are recorded on our unaudited consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of acquired businesses are included in the unaudited consolidated statements of operations since their respective acquisition dates. The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets, estimated contingent consideration payments and/or pre-acquisition contingencies, all of which ultimately affect the fair value of goodwill established as of the acquisition date. Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date and is then subsequently tested for impairment at least annually. If the fair value of the net assets acquired exceeds the purchase price consideration, we record a gain on bargain purchase. However, in such a case, before the measurement period closes we perform a reassessment to reconfirm whether we have correctly identified all of the assets acquired and all of the liabilities assumed as of the acquisition date. As part of our accounting for business combinations we are required to estimate the useful lives of identifiable intangible assets recognized separately from goodwill. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the acquired business. An intangible asset with a finite useful life shall be amortized; an intangible asset with an indefinite useful life shall not be amortized. We base the estimate of the useful life of an intangible asset on an analysis of all pertinent factors, in particular, all of the following factors with no one factor being more presumptive than the other: ● The expected use of the asset. ● The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate. ● Any legal, regulatory, or contractual provisions that may limit the useful life. ● Our own historical experience in renewing or extending similar arrangements, consistent with our intended use of the asset, regardless of whether those arrangements have explicit renewal or extension provisions. ● The effects of obsolescence, demand, competition, and other economic factors. ● The level of maintenance expenditures required to obtain the expected future cash flows from the asset. If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset shall be considered to be indefinite. The term indefinite does not mean the same as infinite or indeterminate. The useful life of an intangible asset is indefinite if that life extends beyond the foreseeable horizon—that is, there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the acquired business. Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired entity and are inherently uncertain. Examples of critical estimates in accounting for acquisitions include but are not limited to: ● future expected cash flows from sales of products and services and related contracts and agreements; ● discount and long-term growth rates; and ● the estimated fair value of the acquisition-related contingent consideration, which is performed using a probability-weighted income approach based upon the forecasted achievement of post-acquisition pre-determined targets; |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | NOTE 2 – Leases Adoption of ASC Topic 842, Leases On January 1, 2019, the Company adopted ASC 842, Leases The Company determines if an arrangement is a lease, or contains a lease, when a contract is signed. The Company determines if a lease is an operating or financing lease and records a lease asset and a lease liability upon lease commencement. The Company had operating leases for office space in Arkansas and South Carolina. The Company has no finance leases as of March 31, 2020. For office space, the Company has elected to combine the fixed payments to lease the asset and any fixed non-lease payments (such as maintenance or utility charges) when calculating the lease asset and lease liability. On July 29, 2019, the Company terminated its Arkansas lease effect October 31, 2019 in accordance with Section 8 of their First Amendment. The Company has a lease in Florida with a monthly rent of $80. The Company recognizes lease expense on a straight-line basis over the lease term. Certain of our lease agreements include rent payments which are adjusted periodically for inflation. Any change in payments due to changes in inflation rates are recognized as variable lease expense as they are incurred. Variable lease expense also includes costs for property taxes, insurance and services provided by the lessor which are charged based on usage or performance. Some leases have one or more options to renew, with renewal terms that can initially extend the lease term for various periods up to 2 years. The exercise of renewal options for office space and data centers is at the Company’s discretion and are included if they are reasonably certain to be exercised. As of March 31, 2020, the Company’s weighted-average remaining lease term for all leases was approximately 2.58 years. When the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as its discount rate to determine the present value of its lease payments. The incremental borrowing rates approximate the rate the Company would pay to borrow in the currency of the lease payments on a collateralized basis for the weighted-average life of the lease. As of March 31, 2020, the Company’s weighted-average discount rate was approximately 5.0%. The Company recognized the following related to leases in its Unaudited Consolidated Balance Sheets at March 31, 2020 and December 31, 2019: Leases Classification in Consolidated Balance Sheet March 31, 2020 December 31, 2019 Operating lease assets Right of use asset $ 22,935 $ 25,001 Lease Liabilities: Current operating lease liabilities Right of use liability $ 8,291 $ 8,040 Long-term operating lease liabilities Right of use liability 14,585 16,784 Total operating lease liabilities $ 22,876 $ 24,824 As of March 31, 2020, the operating lease liabilities will mature over the following periods: Remainder of 2020 $ 6,850 2021 9,600 2022 8,000 2023 — Total remaining lease payments $ 24,450 Less: Imputed interest (1,574 ) Total capital lease liabilities $ 22,876 The Company recognized the following related to operating leases in its Unaudited Consolidated Statements of Operations at March 31, 2020 and 2019: Classification in Unaudited Three Months March 31, Leases Consolidated Statements of Operations 2020 Lease expense General and administrative and Information technology $ 2,372 Total lease expense $ 2,372 Classification in Unaudited Three Months March 31, Leases Consolidated Statements of Operations 2019 Lease expense General and administrative and Information technology $ 15,484 Total lease expense $ 15,484 Supplemental cash flow information related to operating leases as of March 31, 2020 and 2019 are as follows: Three Months March 31, Leases 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 2,372 Right-of-use assets obtained in exchange for lease obligations: Operating Leases $ — Three Months Ended March 31, Leases 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 15,484 Right-of-use assets obtained in exchange for lease obligations: Operating Leases $ — “Operating lease amortization” presented in the operating activities section of the Unaudited Consolidated Statements of Cash Flows reflects the portion of the operating lease expense that amortized the operating lease asset. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 3 – Intangible Assets Amortizing Estimates Gross Carrying Gross Carrying 2019 Customer Lists 8 years $ 1,326,500 $ 1,326,500 Tradenames 15 years 377,000 377,000 IP Technologies 10 years 819,000 819,000 Non-compete 5 years 464,000 464,000 2,986,500 2,986,500 Less: Accumulated Amortization (847,790 ) (756,378 ) $ 2,138,710 $ 2,230,122 The amortization expense related to the intangible assets was $91,412 and $116,284 for the three months ended March 31, 2020 and 2019 respectively. During the third quarter 2019, the Company reviewed its customer lists and impaired approximately 50% of its value, or $1,061,200. The valuation of the assets acquired and liabilities assumed in connection with this acquisition was based on fair values at the acquisition date. The assets purchased and liabilities assumed for these acquisitions have been reflected in the accompanying consolidated balance sheets. |
Notes payable
Notes payable | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Notes payable | NOTE 4 – Notes payable The Company obtained a secured convertible note with a lender for $5 million, interest is payable monthly, at 12.75% per annum, the note matures on September 29, 2020. The note can be converted at any time in whole or in part at $0.44 per share. In addition, the lender received 3,584,279 shares of common stock valued at $0.10 per share along with a 2% original issue discount. The total amount of the discount is $493,345. The Company had incurred $34,917 in loan costs. Both the discount and loan costs are presented as a discount to the note payable. The Company recorded $154,500 and $150,000 of payment-in-kind interest which was added to the note as of December 31, 2019 and 2018, respectively. The note is collateralized by substantially all the assets of the Company. The Company, as part of consideration for the purchase of CCI and SCLLC, issued a $2.5 million promissory note to the seller. The note is non-interest bearing with five annual payments of $500,000 (subject to adjustment to $377,400 if the business of CCI and SCLLC does not meet certain financial targets in 2017 and 2018) and matures on September 30, 2022. Interest has been imputed at 12.75% per annum. The note is in default as of September 30, 2018 due to the Company not making the required principal payment (see Note 10). The Company has expensed default interest (17% per annum) in the amounts of $105,959 and $104,795 as of three months March 31, 2020 and 2019, respectively. Upon each annual payment date (each, a “ Due Date fair market value March 31, December 31, Note payable – monthly interest, 12.75% per annum, matures on September 29, 2020 $ 5,304,500 $ 5,304,500 Less discounts (82,224 ) (123,336 ) Note payable – monthly interest, 17.00% per annum, matures on September 30, 2022 (The loan is currently in default and currently payable.) 2,500,000 2,500,000 Less discounts — — Subtotal 7,722,276 7,681,164 Less: current portion 7,722,276 7,681,164 Long-term portion $ — $ — Principal payments on the above notes mature as follows: Three months ending 2020 $ 8,334,508 2021 — 2023 — 2023 — 2024 — Thereafter $ 8,334,508 |
Related Party
Related Party | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party | NOTE 5 – Related Party On January 10, 2018, the Company entered into employment agreement with David Hopkins, its President, effective as of January 1, 2018. Pursuant to the employment agreement, Mr. Hopkins assumed the additional position of Chief Executive Officer of the Company. The employment agreement is for an initial term of three (3) and automatically renews for additional three (3) year periods, provided that the Company achieves Adjusted EBITDA (as defined) of $3,500,000 for any calendar year during the initial term and any renewal term. The employment agreement provides for an initial base salary of $175,000. In the event in any calendar year during the initial term or any renewal term, HRD achieves Adjusted EBITDA of $3,500,000, Mr. Hopkins’ annual base salary shall automatically increase to $250,000 and in the event in any calendar year during the initial term or any renewal term, the Company achieves Adjusted EBITDA of $5,000,000, his annual base salary shall automatically increase to $325,000. Mr. Hopkins will also receive a $600 per month car allowance while the employment agreement is in effect. In addition to the foregoing, pursuant to the employment agreement, Mr. Hopkins was granted an option to purchase 525,000 shares of HRD common stock under the Company’s 2015 Stock Incentive Plan at an exercise price of $0.35 per share. The option vests in six equal semi-annual installments commencing June 30, 2018, expires ten (10) years from the date of grant and is otherwise subject to the terms of the Incentive Plan. In consideration for David Hopkins, the Company’s Chief Executive Officer and President, assuming the additional duties of President of the Company’s two subsidiaries, CCI and SCLLC, on May 31, 2019, the Company entered into an amended and restated employment agreement with Mr. Hopkins, effective as of April 15, 2019 (the “Effective Date”), which superseded the January 2018 employment agreement between the Company and Mr. Hopkins. The amended and restated employment agreement is for an initial term of three (3) years from the Effective Date and automatically renews for additional three (3) year periods, provided that the subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,000,000 for any calendar year during the initial term and any renewal term. The amended and restated employment agreement provides for an initial base salary of $250,000. In the event in any calendar year during the initial term or any renewal term, the Subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,000,000, Mr. Hopkins’ annual base salary shall automatically increase to $300,000 and in the event in any calendar year during the initial term or any renewal term, the subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,500,000, his annual base salary shall automatically increase to $350,000. Mr. Hopkins will also receive a $600 per month car allowance while the amended and restated employment agreement is in effect. The Company has a secured convertible note with a lender for $5 million (See Note 4). |
Stockholders' Deficiency
Stockholders' Deficiency | 3 Months Ended |
Mar. 31, 2020 | |
STOCKHOLDERS' DEFICIENCY | |
Stockholders' Deficiency | NOTE 6 – Stockholders’ Deficiency The Company has authorized 100,000,000 shares of common stock $.001 par value and 5,000,000 shares of preferred stock $.001 par value. |
2015 Incentive Stock Plan
2015 Incentive Stock Plan | 3 Months Ended |
Mar. 31, 2020 | |
Incentive Stock Plan Abstract | |
2015 Incentive Stock Plan | NOTE 7 – 2015 Incentive Stock Plan Our 2015 Incentive Stock Plan (the “ Incentive Plan |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 8 – Income Taxes Income tax (provision) benefit for the three months ended March 31, 2020 and 2019 was $152,000 and $11,136, respectively. The effective tax rates for the periods were 27% respectively. The 2018 tax rate reflects the enactment of the Tax Cuts and Jobs Act of 2017 (the “Act”) which made significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. As of March 31, 2020, the Company has approximately $1,350,000 of federal and state net operating loss carryovers (“NOLs”) which carry forward indefinitely. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established $0 valuation allowance against the deferred tax asset relating to NOLs because it is more likely than not that all of the deferred tax asset will be realized. The Company files U.S. federal and state of Florida and Arkansas tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2016. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense. |
Business Segment Information
Business Segment Information | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Business Segment Information | NOTE 9 – Business Segment Information The Company has two reportable segments (billing services and OTC and prescription medication) supported by a corporate group which conducts activities that are non-segment specific. The following table present selected financial information about the Company’s reportable segments for the three months ended March 31, 2020 and 2019. For the three months ended March 31, 2020 Consolidated Billing OTC and Corporate Revenues $ 382,275 $ 305,688 $ 76,587 $ — Cost of Revenue 50,878 — 50,878 — Long-lived assets 5,497,489 4,962,810 534,679 — Income (loss) before income tax (562,963 ) 175,449 23,045 (761,457 ) Identifiable assets 2,184,263 1,649,584 534,679 — Depreciation and amortization 95,574 71,680 23,894 — For the three months ended March 31, 2019 Consolidated Billing Services OTC and Corporate Revenues $ 1,044,009 $ 822,886 $ 221,123 $ — Cost of Revenue 166,528 — 166,528 — Long-lived assets 7,139,768 5,407,637 1,732,131 — Income (loss) before income tax (43,303 ) 519,088 39,814 (602,205 ) Identifiable assets 3,826,542 2,922,717 903,825 — Depreciation and amortization 121,135 91,337 29,798 — |
Litigation
Litigation | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation | NOTE 10 – Litigation In August 2018, we were served with a complaint (which was amended in September 2018 to include David Hopkins, our CEO, as a defendant), filed in Miami-Dade County, Florida Circuit Court by the seller of CCI and SCLLC. In the complaint, the seller alleges breach of contract and fraud in that we allegedly failed to pay him excess working capital as of the closing of the acquisition of approximately $381,000 and failed to reimburse him for certain credit card expenses. We believe that the seller’s claims are without merit, as his calculation of working capital does not follow the methodology provided for in the Securities Purchase Agreement for the transaction and that in fact, there was a working capital shortfall at closing of approximately $725,000 (for which we demanded payment in June 2018). Moreover, the seller has refused to submit the working capital dispute to the resolution process provided for in the Securities Purchase Agreement. We have answered the complaint denying the seller’s claims and have filed counterclaims against the seller for the sums we believe are do us for the working capital shortfall and for damages arising from seller’s breach of contract, breach of good faith and fair dealing, fraud in the inducement, indemnification obligations under the Securities Purchase Agreement and violation of his non-competition and non-solicitation agreement with the Company. The parties have engaged in discovery, and we believe that the information obtained thus far supports our claims and refutes the seller’s claims. On November 18, 2019, the seller filed a motion, asking the court to stay the case temporarily because he believed he was the target of a parallel federal criminal investigation related to facts at issue in the case. On December 11, 2019, the court granted his motion and stayed the case for 120 days. The stay issued by the court on December 11, 2019 expired on April 13, 2020. The seller has again moved to stay the case, claiming that the instant proceedings overlap with an ongoing federal criminal investigation in which he believes he is a target. Health-Right and Mr. Hopkins have opposed Burroughs' second motion to stay. Health-Right and Mr. Hopkins also recently filed an amended counterclaim to add claims against the seller for breach of the non-compete and non-solicitation provisions of the Securities Purchase Agreement. The seller has not yet responded to the amended counterclaim. The Seller also filed a second amended complaint against Health-Right and Mr. Hopkins, which Health-Right and Mr. Hopkins have moved to dismiss as legally insufficient. In April 2018, Stephen Andrews, the former CEO of CCI, filed a wrongful termination arbitration claim seeking recovery in the amount in excess of $500,000. In addition to raising defenses, the Company has filed a counterclaim alleging violation of non-disclosure/non-compete agreements by Mr. Andrews as well as claims for breach of a non-solicitation agreement, breach of the employee manual and injunctive relief. The final arbitration hearing was scheduled for January 2020. However, Andrews moved for a stay of the arbitration on November 20, 2019 based on his belief that he is the target of a parallel federal criminal grand jury investigation. The arbitrator granted the stay on December 17, 2019 and the final arbitration hearing was postponed indefinitely. |
Concentration
Concentration | 3 Months Ended |
Mar. 31, 2020 | |
Concentration | |
Concentration | NOTE 11 – Concentration The Company offers physicians and medical clinics an ancillary program to treat their patients with topical prescription medicine to manage pain. The program is designed for patients with work related injuries managed under worker compensation claims. The program both delivers the topical medicine to the care provider for sale to the patient, as well as providing the care provider with insurance claim processing services on behalf of the patient. Accounts Receivable Concentration At March 31, 2020 At December 31, 2019 Number of customers over 10% 5 6 Percentage of accounts receivable 13%, 15%, 16%, 29%, 38 % 10%, 12%, 13%, 13%, 15%, 18 % We have two vendors who both represent 100% of purchased products that are sold for first quarter 2020 and 2019. For the three months ended March 31, 2020, the Company had three clinics that represented 10%, 10%, and 16% of total revenue. For the three months ended March 31, 2019, the Company had no clinics that represented more than 10% of total revenue. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 12 – Subsequent Events The Company has evaluated subsequent events through the date that the financial statements were issued and determined that there were the following subsequent events requiring adjustment to or disclosure in the financial statements. On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020. The Company has been approved for funds under the Paycheck Protection Program after the period end in the amount of $117,713. The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Therefore, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statement and notes thereto included in the 2019 Form 10-K for the year ended December 31, 2019. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. Certain prior period amounts have been reclassified to conform to the current presentation. |
Use of Estimates | Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. |
Cash and cash equivalents | Cash and cash equivalents The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. |
Concentration of Risk | Concentration of Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its principal cash balances in various financial institutions. These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At March 31, 2020 and December 31, 2019, $1,367,531 and $1,289,897 were in excess of the FDIC insured limit, respectively. |
Accounts Receivable | Accounts Receivable Accounts receivable are stated at the amount the Company expects to collect from customers. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management has rewarded an allowance for doubtful accounts in the amounts of $4,660 and $5,040 at March 31, 2020 and December 31, 2019 respectively. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of the Company’s customers was to deteriorate and adversely affecting their ability to make payments, additional allowances would be required. |
Revenue Recognition | Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU and all subsequently issued clarifying ASUs replaced most existing revenue recognition guidance in U.S. GAAP. The ASU also required expanded disclosures relating to the nature amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new standard effective January 1, 2018, the first day of the Company’s fiscal year. For these reasons, the adoption of this ASU did not have a significant impact on the Company’s financial statements. Effective January 1, 2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers. The revenue recognition policies as enumerated below reflect the Company’s accounting policies effective January 1, 2018, which did not have a materially different financial statement result than what the results would have been under the previous accounting policies for revenue recognition. CCI’s revenue results from the consulting services agreements, which included providing services to physicians for billing insurance companies. The Company has determined the performance obligations in these consulting service agreements relate to the satisfaction of billing the insurance company on behalf of the physicians. CCI remits billings to insurance companies on behalf of the physicians, collect the proceeds and remits an agreed upon percentage amount to the physician. The amounts reported as revenue are recorded net of amounts remitted. The Company follows Staff Accounting Bulletin (“SAB”) No. 104, which states that the revenue is not earned until the company has been paid by the insurance company at which time it becomes realized or realizable. SCLLC’s revenue from the sale of products are recognized when the sale is consummated, and title is transferred. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in the sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. As such, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606. The following tables disaggregate revenue by major source for the three months ended March 31, 2020 and 2019: Three Months Ended March 31, 2020 Ancillary Program OTC and Prescription Medication Corporate (1) Total Product Sales $ — $ 76,587 $ — $ 76,587 Consulting Services 305,688 — — 305,688 Total Revenue $ 305,688 $ 76,587 $ — $ 382,275 Three Months Ended March 31, 2019 Ancillary Program OTC and Prescription Medication Corporate (1) Total Product Sales $ — $ 221,123 $ — $ 221,123 Consulting Services 822,886 — — 822,886 Total Revenue $ 822,886 $ 221,123 $ — $ 1,044,009 (1) The Company’s corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription. |
Inventories | Inventories Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, or net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their net realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations. Based on management’s estimate, there was no obsolete inventory at March 31, 2020 and December 31, 2019. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Expenditures for additions are capitalized, repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows: March 31, December 31, Machinery and equipment – 7 years $ 44,497 $ 44,497 Accumulated depreciation (21,879 ) (20,626 ) Total property and equipment $ 22,618 $ 23,871 |
Intangible Assets | Intangible Assets Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” Intangible assets are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified. The Company calculates fair value of our intangible assets as the present value of estimated future cash flows the Company expects to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, The Company uses estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group). During the third quarter 2019, the Company reviewed its customer lists and impaired approximately 50% of its value, or $1,061,200. |
Goodwill | Goodwill Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles—Goodwill and Other,” In January 2017, the FASB issued ASU 2017-04 that eliminates “step 2” from the goodwill impairment test. The Company made the election to early adopt ASU 2017-04 as of January 1, 2018 and the standard was applied on a prospective basis, as required. In accordance with ASC 350-25-35-3, “An entity may first assess qualitative factors, as described in paragraphs 350-20-35-3A through 35-3G, to determine whether it is necessary to perform the quantitative goodwill impairment test.” Management reviewed the following qualitative factors around its goodwill and believes that the fair value of its investment in the Company exceeds its carrying amount at March 31, 2020 and December 31, 2019. The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of December 31 and whenever events or changes in circumstances indicate carrying amount may not be recoverable. When assessing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a two-step impairment test. If the Company concludes otherwise, then no further action is taken. The Company also has the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact. The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit. If the carrying amount of a reporting unit is in excess of its fair value, an impairment may exist, and the Company must perform the second step of the impairment analysis to measure the amount of the impairment loss, by allocating the reporting unit’s fair value to its assets and liabilities other than goodwill, comparing the carrying amount of the goodwill to the resulting implied fair value of the goodwill, and recording an impairment charge for any excess. |
Stock-based compensation | Stock-based compensation The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the fair value of the award is calculated on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for common shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, the fair value of the award on the date of grant is calculated in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. |
Income Taxes | Income Taxes The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. 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 the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized. ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding, noted above. |
Accounting for Business Combinations | Accounting for Business Combinations In accordance with ASC Topic 805, “Business Combinations,” when accounting for business combinations we are required to recognize the assets acquired, liabilities assumed, contractual contingencies, non-controlling interests and contingent consideration at their fair value as of the acquisition date. These items are recorded on our unaudited consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of acquired businesses are included in the unaudited consolidated statements of operations since their respective acquisition dates. The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets, estimated contingent consideration payments and/or pre-acquisition contingencies, all of which ultimately affect the fair value of goodwill established as of the acquisition date. Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date and is then subsequently tested for impairment at least annually. If the fair value of the net assets acquired exceeds the purchase price consideration, we record a gain on bargain purchase. However, in such a case, before the measurement period closes we perform a reassessment to reconfirm whether we have correctly identified all of the assets acquired and all of the liabilities assumed as of the acquisition date. As part of our accounting for business combinations we are required to estimate the useful lives of identifiable intangible assets recognized separately from goodwill. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the acquired business. An intangible asset with a finite useful life shall be amortized; an intangible asset with an indefinite useful life shall not be amortized. We base the estimate of the useful life of an intangible asset on an analysis of all pertinent factors, in particular, all of the following factors with no one factor being more presumptive than the other: ● The expected use of the asset. ● The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate. ● Any legal, regulatory, or contractual provisions that may limit the useful life. ● Our own historical experience in renewing or extending similar arrangements, consistent with our intended use of the asset, regardless of whether those arrangements have explicit renewal or extension provisions. ● The effects of obsolescence, demand, competition, and other economic factors. ● The level of maintenance expenditures required to obtain the expected future cash flows from the asset. If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset shall be considered to be indefinite. The term indefinite does not mean the same as infinite or indeterminate. The useful life of an intangible asset is indefinite if that life extends beyond the foreseeable horizon—that is, there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the acquired business. Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired entity and are inherently uncertain. Examples of critical estimates in accounting for acquisitions include but are not limited to: ● future expected cash flows from sales of products and services and related contracts and agreements; ● discount and long-term growth rates; and ● the estimated fair value of the acquisition-related contingent consideration, which is performed using a probability-weighted income approach based upon the forecasted achievement of post-acquisition pre-determined targets; |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of disaggregates revenue | The following tables disaggregate revenue by major source for the three months ended March 31, 2020 and 2019: Three Months Ended March 31, 2020 Ancillary Program OTC and Prescription Medication Corporate (1) Total Product Sales $ — $ 76,587 $ — $ 76,587 Consulting Services 305,688 — — 305,688 Total Revenue $ 305,688 $ 76,587 $ — $ 382,275 Three Months Ended March 31, 2019 Ancillary Program OTC and Prescription Medication Corporate (1) Total Product Sales $ — $ 221,123 $ — $ 221,123 Consulting Services 822,886 — — 822,886 Total Revenue $ 822,886 $ 221,123 $ — $ 1,044,009 (1) The Company’s corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription. |
Schedule of property and equipment | Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows: March 31, December 31, Machinery and equipment – 7 years $ 44,497 $ 44,497 Accumulated depreciation (21,879 ) (20,626 ) Total property and equipment $ 22,618 $ 23,871 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Schedule of related to leases in its Unaudited Condensed Consolidated Balance Sheet | The Company recognized the following related to leases in its Unaudited Consolidated Balance Sheets at March 31, 2020 and December 31, 2019: Leases Classification in Consolidated Balance Sheet March 31, 2020 December 31, 2019 Operating lease assets Right of use asset $ 22,935 $ 25,001 Lease Liabilities: Current operating lease liabilities Right of use liability $ 8,291 $ 8,040 Long-term operating lease liabilities Right of use liability 14,585 16,784 Total operating lease liabilities $ 22,876 $ 24,824 |
Schedule of operating lease maturity | As of March 31, 2020, the operating lease liabilities will mature over the following periods: Remainder of 2020 $ 6,850 2021 9,600 2022 8,000 2023 — Total remaining lease payments $ 24,450 Less: Imputed interest (1,574 ) Total capital lease liabilities $ 22,876 |
Schedule of operating leases in its Unaudited Consolidated Statement of Operations | The Company recognized the following related to operating leases in its Unaudited Consolidated Statements of Operations at March 31, 2020 and 2019: Classification in Unaudited Three Months March 31, Leases Consolidated Statements of Operations 2020 Lease expense General and administrative and Information technology $ 2,372 Total lease expense $ 2,372 Classification in Unaudited Three Months March 31, Leases Consolidated Statements of Operations 2019 Lease expense General and administrative and Information technology $ 15,484 Total lease expense $ 15,484 |
Supplemental cash flow information related to capital leases | Supplemental cash flow information related to operating leases as of March 31, 2020 and 2019 are as follows: Three Months March 31, Leases 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 2,372 Right-of-use assets obtained in exchange for lease obligations: Operating Leases $ — Three Months Ended March 31, Leases 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 15,484 Right-of-use assets obtained in exchange for lease obligations: Operating Leases $ — |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Amortizing Estimates Gross Carrying Gross Carrying 2019 Customer Lists 8 years $ 1,326,500 $ 1,326,500 Tradenames 15 years 377,000 377,000 IP Technologies 10 years 819,000 819,000 Non-compete 5 years 464,000 464,000 2,986,500 2,986,500 Less: Accumulated Amortization (847,790 ) (756,378 ) $ 2,138,710 $ 2,230,122 |
Notes payable (Tables)
Notes payable (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of note payable | March 31, December 31, Note payable – monthly interest, 12.75% per annum, matures on September 29, 2020 $ 5,304,500 $ 5,304,500 Less discounts (82,224 ) (123,336 ) Note payable – monthly interest, 17.00% per annum, matures on September 30, 2022 (The loan is currently in default and currently payable.) 2,500,000 2,500,000 Less discounts — — Subtotal 7,722,276 7,681,164 Less: current portion 7,722,276 7,681,164 Long-term portion $ — $ — |
Schedule of principal payments on maturity | Principal payments on the above notes mature as follows: Three months ending 2020 $ 8,334,508 2021 — 2023 — 2023 — 2024 — Thereafter $ 8,334,508 |
Business Segment Information (T
Business Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of reportable segments | The following table present selected financial information about the Company’s reportable segments for the three months ended March 31, 2020 and 2019. For the three months ended March 31, 2020 Consolidated Billing OTC and Corporate Revenues $ 382,275 $ 305,688 $ 76,587 $ — Cost of Revenue 50,878 — 50,878 — Long-lived assets 5,497,489 4,962,810 534,679 — Income (loss) before income tax (562,963 ) 175,449 23,045 (761,457 ) Identifiable assets 2,184,263 1,649,584 534,679 — Depreciation and amortization 95,574 71,680 23,894 — For the three months ended March 31, 2019 Consolidated Billing Services OTC and Corporate Revenues $ 1,044,009 $ 822,886 $ 221,123 $ — Cost of Revenue 166,528 — 166,528 — Long-lived assets 7,139,768 5,407,637 1,732,131 — Income (loss) before income tax (43,303 ) 519,088 39,814 (602,205 ) Identifiable assets 3,826,542 2,922,717 903,825 — Depreciation and amortization 121,135 91,337 29,798 — |
Concentration (Tables)
Concentration (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Concentration | |
Schedule of concentration | Accounts Receivable Concentration At March 31, 2020 At December 31, 2019 Number of customers over 10% 5 6 Percentage of accounts receivable 13%, 15%, 16%, 29%, 38 % 10%, 12%, 13%, 13%, 15%, 18 % |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | ||
Total Revenue | $ 382,275 | $ 1,044,009 | |
Product Sales [Member] | |||
Total Revenue | 76,587 | 221,123 | |
Consulting Services[Member] | |||
Total Revenue | 305,688 | 822,886 | |
Ancillary Program [Member] | |||
Total Revenue | 305,688 | 822,886 | |
Ancillary Program [Member] | Product Sales [Member] | |||
Total Revenue | |||
Ancillary Program [Member] | Consulting Services[Member] | |||
Total Revenue | 305,688 | 822,886 | |
OTC and Prescription Medication [Member] | |||
Total Revenue | 76,587 | 221,123 | |
OTC and Prescription Medication [Member] | Product Sales [Member] | |||
Total Revenue | 76,587 | 221,123 | |
OTC and Prescription Medication [Member] | Consulting Services[Member] | |||
Total Revenue | |||
Corporate [Member] | |||
Total Revenue | [1] | ||
Corporate [Member] | Product Sales [Member] | |||
Total Revenue | [1] | ||
Corporate [Member] | Consulting Services[Member] | |||
Total Revenue | [1] | ||
[1] | The Company's corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription. |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Machinery and equipment, estimated useful life | 7 years | |
Machinery and equipment | $ 44,497 | $ 44,497 |
Accumulated depreciation | (21,879) | (20,626) |
Total property and equipment | $ 22,618 | $ 23,871 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Federal Deposit Insurance Corporation maximum limit | $ 250,000 | |
FDIC insured limit | 1,367,531 | $ 1,289,897 |
Allowance for doubtful accounts | 4,660 | 5,040 |
Obsolete inventory | $ 0 | $ 0 |
Leases (Details)
Leases (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Leases | ||
Operating lease assets | $ 22,935 | $ 25,001 |
Lease Liabilities: | ||
Current operating lease liabilities | 8,291 | 8,040 |
Long-term operating lease liabilities | 14,585 | 16,784 |
Total operating lease liabilities | $ 22,876 | $ 24,824 |
Leases (Details 1)
Leases (Details 1) | Mar. 31, 2020USD ($) |
Leases [Abstract] | |
Remainder of 2020 | $ 6,850 |
2021 | 9,600 |
2022 | 8,000 |
2023 | |
Total remaining lease payments | 24,450 |
Less: Imputed interest | (1,574) |
Total capital lease liabilities | $ 22,876 |
Leases (Details 2)
Leases (Details 2) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Total lease expense | $ 2,372 | $ 15,484 |
General and Administrative Expense [Member] | ||
Total lease expense | $ 2,372 | $ 15,484 |
Leases (Details 3)
Leases (Details 3) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flow from operating leases | $ 2,372 | $ 15,484 |
Right-of-use assets obtained in exchange for lease obligations: | ||
Operating Leases |
Leases (Details Narative)
Leases (Details Narative) - USD ($) | Oct. 06, 2019 | Mar. 31, 2020 |
Weighted-average remaining lease term | 2 years 6 months 28 days | |
Weighted-average discount rate | 5.00% | |
Renew term of lease termination | 2 years | |
ARKANSAS | ||
Term of lease termination | 1 year | |
Monthly rent expense | $ 1,210 | |
FLORIDA | ||
Monthly rent expense | $ 80 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Intangible Assets, Gross | $ 2,986,500 | $ 2,986,500 |
Less: Accumulated Amortization | (847,790) | (756,378) |
Intangible Assets, Net | $ 2,138,710 | 2,230,122 |
Customer Lists [Member] | ||
Estimates useful life | 8 years | |
Intangible Assets, Gross | $ 1,326,500 | 1,326,500 |
Trade Names [Member] | ||
Estimates useful life | 15 years | |
Intangible Assets, Gross | $ 377,000 | 377,000 |
IP Technologies [Member] | ||
Estimates useful life | 10 years | |
Intangible Assets, Gross | $ 819,000 | 819,000 |
Non-compete [Member] | ||
Estimates useful life | 5 years | |
Intangible Assets, Gross | $ 464,000 | $ 464,000 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Sep. 30, 2019 | Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Amortization expense related the intangible assets | $ 91,412 | $ 116,284 | |
Impairment of intangible assets | $ 1,061,200 | ||
Percentage of impaired | 50.00% |
Notes payable (Details)
Notes payable (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Note payable | $ 2,500,000 | $ 2,500,000 |
Subtotal | 7,722,276 | 7,681,164 |
Less: current portion | 5,222,276 | 5,181,164 |
Long- term portion | ||
Notes Payable One [Member] | ||
Note payable | 5,304,500 | 5,304,500 |
Less discounts | (82,224) | (123,336) |
Notes Payable Two [Member] | ||
Note payable | 2,500,000 | 2,500,000 |
Less discounts |
Notes payable (Details 1)
Notes payable (Details 1) | Mar. 31, 2020USD ($) |
Year ending December 31: | |
2020 | $ 8,334,508 |
2021 | |
2023 | |
2023 | |
2024 | |
Thereafter | $ 8,334,508 |
Notes payable (Details Narrativ
Notes payable (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Common stock issued | 22,869,191 | 22,869,191 | ||
Discount amount | $ 82,224 | $ 123,336 | ||
Payment-in-kind interest | 41,112 | $ 41,112 | ||
Common Compounds Inc. & EzPharmaRx LLC [Member] | ||||
Face amount | $ 2,500,000 | |||
Interest rate | 12.75% | |||
Default interest rate | 17.00% | |||
Maturity date | Sep. 30, 2022 | |||
Annual payment | $ 500,000 | |||
Unamortized discount | 105,959 | $ 104,795 | ||
Financial targets adjustment | $ 377,400 | |||
Description of equit conversion | common stock at a conversion price equal to 50% of “fair market value,” which is defined as the average closing price for the shares on the principal market on which they are traded during the thirty (30) trading days prior to the applicable Due Date, provided, further, that (a) the conversion price shall not be lower than $2.00 per share, subject to adjustment for stock splits, stock dividends and similar recapitalization events; and (b) in the event such conversion price as so adjusted is lower than $2.00 per share, the installment payable upon such Due Date may not be converted into shares without written agreement between the Company and the seller. | |||
Notes Payable One [Member] | ||||
Interest rate | 12.75% | |||
Maturity date | Sep. 29, 2020 | |||
Unamortized discount | $ 82,224 | 123,336 | ||
Notes Payable Two [Member] | ||||
Interest rate | 17.00% | |||
Maturity date | Sep. 30, 2022 | |||
Unamortized discount | ||||
Lender [Member] | Secured Convertible Note [Member] | ||||
Face amount | $ 5,000,000 | |||
Interest rate | 12.75% | |||
Maturity date | Sep. 29, 2020 | |||
Number of shares issued | 3,584,279 | |||
Conversion price per Share | $ 0.44 | |||
Shares issued price per share | $ 0.10 | |||
Original issue discount rate | 2.00% | |||
Discount amount | $ 493,345 | |||
Loan cost | $ 34,917 | |||
Payment-in-kind interest | $ 154,500 | $ 150,000 | ||
Description of collateral | The note is collateralized by substantially all the assets of the Company. |
Related Party (Details Narrativ
Related Party (Details Narrative) - USD ($) | May 31, 2018 | Jan. 10, 2018 | Mar. 31, 2020 | Sep. 29, 2017 |
Lender [Member] | ||||
Collateral amount | $ 5,000,000 | |||
Mr. David Hopkins [Member] | ||||
Base Salary | $ 250,000 | $ 175,000 | $ 325,000 | |
Car allowance per month | 600 | |||
Adjusted EBITDA | $ 5,000,000 | |||
Option granted | 525,000 | |||
Option exerciseable price | $ 0.35 | |||
Term | 10 years | |||
Description of establishing terms | The amended and restated employment agreement is for an initial term of three (3) years from the Effective Date and automatically renews for additional three (3) year periods, provided that the subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,000,000 for any calendar year during the initial term and any renewal term. | The employment agreement is for an initial term of three (3) and automatically renews for additional three (3) year periods, provided that the Company achieves Adjusted EBITDA (as defined) of $3,500,000 for any calendar year during the initial term and any renewal term. | Mr. Hopkins' annual base salary shall automatically increase to $250,000 and in the event in any calendar year during the initial term or any renewal term. | |
CCI And SCLLC [Member] | ||||
Base Salary | $ 350,000 | |||
Car allowance per month | 600 | |||
Adjusted EBITDA | $ 3,000,000 |
Stockholders' Deficiency (Detai
Stockholders' Deficiency (Details Narrative) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
STOCKHOLDERS' DEFICIENCY | ||
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
2015 Incentive Stock Plan (Deta
2015 Incentive Stock Plan (Details Narrative) - 2015 Stock Option Incentive Plan [Member] | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Stock issued for option plan | 3,000,000 |
Options to purchase | 1,087,500 |
Option exerciseable price | $ / shares | $ 0.35 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Income tax benefit | $ 152,000 | $ 11,136 |
Effective tax rates | 27.00% | |
Change in tax rate | 21.00% | |
Federal and state net operating loss carryovers | $ 1,350,000 | |
Valuation allowance deferred tax asset | $ 0 |
Litigation (Details Narrative)
Litigation (Details Narrative) - USD ($) | 1 Months Ended | ||
Aug. 31, 2018 | Jun. 30, 2018 | Apr. 30, 2018 | |
Chief Executive Officer [Member] | |||
Working capital | $ 381,000 | ||
Termination of arbitration claim | $ 500,000 | ||
Arbitration hearing | The final arbitration hearing was scheduled for January 2020. | ||
Seller [Member] | Securities Purchase Agreement [Member] | |||
Working capital shortfall | $ 725,000 |
Business Segment Information (D
Business Segment Information (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2020 | Sep. 30, 2019 | Mar. 31, 2019 | ||
Revenues | $ 382,275 | $ 1,044,009 | ||
Cost of Revenue | 50,878 | 166,528 | ||
Long-lived assets | 5,497,489 | 7,139,768 | ||
Income (loss) before income tax | (562,963) | (43,303) | ||
Identifiable assets | 2,184,263 | 3,826,542 | ||
Depreciation and amortization | 95,574 | 121,135 | ||
Impairment loss | $ 1,061,200 | |||
Billing Services [Member] | ||||
Revenues | 305,688 | 822,886 | ||
Cost of Revenue | ||||
Long-lived assets | 4,962,810 | 5,407,637 | ||
Income (loss) before income tax | 175,449 | 519,088 | ||
Identifiable assets | 1,649,584 | 2,922,717 | ||
Depreciation and amortization | 71,680 | 91,337 | ||
OTC and Prescription Medicine [Member] | ||||
Revenues | 76,587 | 221,123 | ||
Cost of Revenue | 50,878 | 166,528 | ||
Long-lived assets | 534,679 | 1,732,131 | ||
Income (loss) before income tax | 23,045 | 39,814 | ||
Identifiable assets | 534,679 | 903,825 | ||
Depreciation and amortization | 23,894 | 29,798 | ||
Corporate [Member] | ||||
Revenues | [1] | |||
Cost of Revenue | ||||
Long-lived assets | ||||
Income (loss) before income tax | (761,457) | (602,205) | ||
Identifiable assets | ||||
Depreciation and amortization | ||||
[1] | The Company's corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription. |
Business Segment Information _2
Business Segment Information (Details Narrative) | 3 Months Ended |
Mar. 31, 2020Segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Concentration (Details)
Concentration (Details) - Accounts Receivable [Member] - Customer Concentration Risk [Member] - Number | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Number of customers | 5 | 6 |
Customer A [Member] | ||
Percentage of revenues | 13.00% | 10.00% |
Customer B [Member] | ||
Percentage of revenues | 15.00% | 12.00% |
Customer C [Member] | ||
Percentage of revenues | 16.00% | 13.00% |
Customer D [Member] | ||
Percentage of revenues | 29.00% | 13.00% |
Customer E [Member] | ||
Percentage of revenues | 38.00% | 15.00% |
Customer F [Member] | ||
Percentage of revenues | 18.00% |
Concentration (Details Narrativ
Concentration (Details Narrative) | 3 Months Ended |
Mar. 31, 2020 | |
Concentration | |
Description of concentration | We have two vendors who both represent 100% of purchased products that are sold for first quarter 2020 and 2019. For the three months ended March 31, 2020, the Company had three clinics that represented 10%, 10%, and 16% of total revenue. For the three months ended March 31, 2019, the Company had no clinics that represented more than 10% of total revenue. |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | Apr. 01, 2020USD ($) |
Subsequent Event [Member] | Paycheck Protection Program [Member] | |
Fund approved | $ 117,713 |