Overview
We are an acquisition holding company focused
on locating undervalued and undercapitalized companies, primarily in the healthcare industry, and providing them capitalization and leadership
to maximize the value and potential of their private enterprises while also providing diversification and risk mitigation for our stockholders.
Specifically, we have and will continue to look at a diverse variety of acquisitions in the healthcare sector in terms of growth stages
and capital structures and we intend to focus our portfolio of subsidiaries approximately as follows: 80% will be targeted to established
profitable niche small to mid-sized healthcare companies and 20% will be targeted to second stage startups in healthcare and related financial
services (emerging businesses with a strong organic growth plan that is materially cash generative).
All of our operations are conducted through, and
our income derived from, our various subsidiaries. We operate the following businesses through our wholly owned subsidiaries.
| · | Healthcare Business. Nova Ortho and Spine, PLLC, or Nova, which we acquired May 31, 2021,
operates a group of regional primary specialty and ancillary care facilities throughout Florida that provide traumatic injury victims
with primary care evaluations, interventional pain management, and specialty consultation services. We focus on plaintiff related care
are and a highly efficient provider of emergency medical condition, or EMC, assessments. We provide a full range of diagnostic and surgical
services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves. From
sports injuries, to sprains, strains, and fractures, our doctors are dedicated to helping patients return to active lifestyles. |
| · | Financial Services (Tax Resolution) Business. Platinum Tax Defenders, or Platinum Tax, which
we acquired on July 31, 2018, is a full-service tax resolution firm located in Los Angeles, California. Since 2011, we have been assisting
all types of taxpayers resolve any and all issues with the Internal Revenue Services, or the IRS, and applicable state tax agencies. We
provide fee-based tax resolution services to individuals and companies that have federal and state tax liabilities by assisting clients
to settle outstanding tax debts. |
| · | Real Estate Business. Edge View Properties, Inc., or Edge View, which we acquired on July
16, 2014, is a real estate company that owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted; six (6)
acres zoned high-density residential (HDR) that can be platted in various configurations to meet current housing needs; and twelve
(12) acres zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon for development, as well
as a common area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond. Management
has invested years working to develop a new and exciting housing development in Salmon, Idaho and plans to enter into a joint venture
agreement with a developer for this planned concept development. |
Each of these businesses is described in more
detail below; however, since our healthcare business comprises almost 90% of our revenue and this business will be our core business moving
forward, we have focused most our disclosures on this business.
Our Corporate History and Structure
We were incorporated on September 3, 1986 in Colorado
as Cardiff International Inc. On November 10, 2005, we merged with Legacy Card Company and became Cardiff Lexington Corporation. On August
27, 2014, we redomiciled and became a corporation under the laws of Florida. On April 13, 2021, we redomiciled and became a corporation
under the laws of Nevada.
As noted above, all of our operations are conducted
through our operating subsidiaries, Nova, Platinum Tax and Edge View.
Nova was organized in the State of Florida on
December 3, 2018. Platinum Tax was incorporated in the State of Nevada on July 12, 2022. Its processor company, Platinum Tax Defenders,
LLC was organized in the State of California on January 3, 2012 and was terminated on November 4, 2021. Edge View was incorporated in
the State of Idaho on February 9, 2005.
We also previously owned all of the equity interests
of We Three, LLC, d/b/a Affordable Housing Initiative, or AHI, an affordable home acquirer located in Maryville, Tennessee. On October
31, 2022, we entered into a buyback agreement to sell AHI back to the original owners in exchange for the return of 175,045 shares of
series F preferred stock by the original owners and our issuance of 67,500 shares of series B preferred stock to the original owners.
The following chart depicts our current organizational
structure:
Our Business Strategy
We employ an acquisition and value creation strategy,
with the goal of locating undervalued and undercapitalized healthcare companies and providing them capitalization and leadership in order
to maximize the value and potential of their private, often family run, enterprises while also providing diversification and risk mitigation
for our stockholders. Our primary focus is on the healthcare sector, with holdings in financial services, and real estate, where we utilize
our management team’s relationship networks, industry experiences and deal sourcing capabilities to target companies we believe
have an experienced management team and compelling assets which we believe are well positioned for growth. Our culture emphasizes core
values, teamwork, accountability, and performance. Specifically, we have and will continue to look at a diverse variety of acquisitions
in the healthcare sector in terms of growth stages and capital structures and we intend to focus our portfolio of subsidiaries approximately
as follows: 80% will be targeted to established profitable niche small to mid-sized healthcare companies and 20% will be targeted to second
stage startups in healthcare and related financial services (emerging businesses with a strong organic growth plan that is materially
cash generative). Our acquisition strategy is driven by structure, transaction value, alignment, resources and return on investment. As
we identify potential targets, it is also our strategy and goal to identify and recruit the right operating executive partners that have
the requisite tools and experience to manage and grow our existing and newly acquired subsidiaries. Based on our management’s long
history and experience in building relationships with a vast number of executives and their teams, we are confident that we have placed
or left successful executives in charge of our current subsidiaries and will be able to identify appropriate executives to add long term
value to any future acquisitions.
After our acquisitions, the entities become wholly
owned subsidiaries and the target company’s management team either maintains responsibility for the day-to-day operations or we
locate suitable executives to overtake responsibility for the entities. We believe that we can then provide these entities with some of
the benefits of being a publicly traded company, including but not limited to, providing them with increased access to funding that we
can obtain on their behalf in the capital markets for operations or expansion and our management team’s experience operating businesses.
Our combined acquisition and value creation strategy drives our goal to deliver our public stockholders an opportunity to own a long term,
stable, durable compounding equity investment that can produce strong returns.
Our Market Opportunity
Utilizing our management teams and principals’
expansive network of relationships, we believe there are a substantial number of small to mid-sized healthcare companies, second stage
startups – emerging businesses with a strong organic growth plan that is materially cash generative and income producing real estate
holdings that we can seek to acquire that can potentially generate attractive returns for our stockholders. We further believe the economic
and market dislocation resulting from the COVID-19 pandemic enhanced our opportunity to obtain potentially profitable businesses, which
are facing lingering working capital challenges post pandemic, but have rebounded and returned to or near previous levels of profitability.
In this environment, we believe the expertise and relationships of our management team represent a compelling value proposition for potential
business targets looking for additional working capital infusion, a pathway to exit some equity, and leadership to assist them to grow
and expand.
Our Acquisition Process
In evaluating a potential target business, we
conduct a comprehensive due diligence review to seek to determine a company’s quality and its intrinsic value. That due diligence
review may include, among other things, financial statement analysis, detailed document reviews, multiple meetings with management, consultations
with relevant industry experts, competitors, customers, and suppliers, as well as a review of additional information that we will seek
to obtain as part of our analysis of a target company. Upon the consummation of an acquisition agreement with a target company, it becomes
a wholly owned subsidiary of our company.
We anticipate structuring our acquisitions is
such a way so that the post-business combination subsidiary company will own or acquire 100% of the equity interests or assets of the
target business or businesses. We may, however, structure future acquisitions such that the post-business combination company owns or
acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management
team or stockholders or for other reasons, but we will only complete such acquisition if the post-business subsidiary company owns or
acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient
for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment
Company Act.
If our board of directors is not able to independently
determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking
firm or an independent valuation or appraisal firm with respect to the satisfaction of such criteria. While we consider it unlikely that
our board of directors will not be able to make an independent determination of the fair market value of a target business or businesses,
it may be unable to do so if the board of directors is less familiar or experienced with the target company’s business, there is
a significant amount of uncertainty as to the value of the company’s assets or prospects, including if such company is at an early
stage of development, operations or growth, or if the anticipated transaction involves a complex financial analysis or other specialized
skills and the board of directors determines that outside expertise would be helpful or necessary in conducting such analysis.
We finance acquisitions primarily through additional
equity and debt financings. We believe that having the ability to finance most, if not all, acquisitions with the general capital resources
raised by our company, rather than financing relating to the acquisition of individual businesses, provides us with an advantage in acquiring
attractive businesses by minimizing delay and closing conditions that are often related to acquisition-specific financings. Because the
timing and size of acquisitions cannot be readily predicted, we may need to be able to obtain funding on short notice to benefit fully
from attractive acquisition opportunities. The sale of additional shares of any class of equity will be subject to market conditions and
investor demand for such shares at prices that may not be in the best interest of our stockholders. The sale of additional equity securities
could also result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and
could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts
or on terms acceptable to us, if at all. See also Item 1A “Risk Factors—Risks Related to Our Business and Structure—We
may not be able to successfully fund acquisitions due to the unavailability of equity or debt financing on acceptable terms, which could
impede the implementation of our acquisition strategy.”
The time required to select and evaluate a target
business and to structure and complete acquisitions, and the costs associated with this process, are not currently ascertainable with
any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which
any acquisition is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another
acquisition.
Members of our management team, including our
officers and directors, will directly or indirectly own a majority of our securities following this offering and, accordingly, may have
a conflict of interest in determining whether a particular target company is an appropriate business with which to effectuate our initial
business combination.
We have not selected any specific business combination
target for our next acquisition, and we have not entered into any letters of intent, nor has anyone on our behalf, initiated any substantive
acquisition discussions, directly or indirectly, with any specific business combination target.
To the extent we effect any future acquisition
with a company or business that may be financially unstable or in its early stages of development or growth, we may be affected by numerous
risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target
business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
There are several risks associated with our acquisition
strategy, including the following risks, which are described more fully in Item 1A “Risk Factors—Risks Related to Our Business
and Structure”:
| · | our acquisition strategy exposes us to substantial risk; |
| · | we may experience difficulty as we evaluate, acquire and integrate businesses that we may acquire, which
could result in drains on our resources, including the attention of our management, and disruptions of our on-going business; |
| · | we may not be able to effectively integrate the businesses that we acquire; |
| · | we face competition for businesses that fit our acquisition strategy and, therefore, we may have to acquire
targets at sub-optimal prices or, alternatively, forego certain acquisition opportunities; |
| · | we may not be able to successfully fund acquisitions due to the unavailability of debt or equity financing
on acceptable terms, which could impede the implementation of our acquisition strategy; and |
| · | we may change our management and acquisition strategies without the consent of our stockholders, which
may result in a determination by us to pursue riskier business activities. |
Competition
In identifying, evaluating, and selecting potential
target business for acquisition, we may encounter intense competition from other entities having a business objective similar to ours,
including blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions.
Many of these entities are well established and have extensive experience identifying and effecting acquisitions directly or through affiliates.
Moreover, many of these competitors possess greater financial, technical, human, and other resources than us. Our ability to acquire larger
target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing
the acquisition of a target business. Any of these factors may place us at a competitive disadvantage in successfully negotiating an acquisition.
Competitive Strengths
We believe that we have several competitive advantages
that differentiate us from other holding companies. Our competitive strengths include:
| · | Management Operating and Investing Experience. Our directors and executive officers have
significant executive, investment and operational experience in the management and growing of small and middle market companies. We believe
that this breadth of experience provides us with a competitive advantage in evaluating businesses and acquisition opportunities. |
| · | Extensive Network of Small to Middle Market Companies. As a result of their experience with
acquisitions and in providing services to small to middle market companies around the United States, our management team members have
developed a broad array of contacts at private and closely held companies. We believe that these contacts will be important in generating
potential acquisition opportunities for us. |
| · | Public Company Benefits. We believe our structure will make us an attractive business transaction
partner to prospective acquisition targets. As an existing public company, we will be able to raise capital to deploy to our acquired
businesses for their business operations. Additionally, we will be able to offer to the employees of our subsidiaries equity in our company
as an additional means of creating management incentives that are better aligned with stockholder’s interests. |
| · | Maintaining of day-to-day control of operations. As part of our acquisition criteria for
a target company, we search for companies with what we believe are strong management teams, which allows us to have the management team
maintain control of the day-to-day operations of the companies. We believe this model is attractive to target companies with management
desiring to obtain the benefits of being a public company while maintaining control over the operations of their company. |
Intellectual Property
We do not have any intellectual property at our
holding company.
Employees
As of December 31, 2022, our company had two full-time
employees (excluding our operating subsidiaries described below). None of our employees are represented by labor unions, and we believe
that we have an excellent relationship with our employees.
Regulation
We do not expect that our holding company will
be subject to material governmental regulation. However, it is our policy to fully comply with all governmental regulation and regulatory
authorities.
Healthcare Business
Our healthcare business is operated by Nova,
which we acquired on May 31, 2021. This business accounted for approximately 88% and 54% of our revenues for the years ended December
31, 2022 and 2021, respectively.
Overview
We operate a group of regional primary specialty
and ancillary care facilities throughout Florida that provide traumatic injury victims with primary care evaluations, interventional pain
management, and specialty consultation services. We focus on plaintiff related care are and a highly efficient provider of EMC assessments.
We provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints,
tendons, muscles, ligaments, and nerves. From sports injuries, to sprains, strains, and fractures, our doctors are dedicated to helping
patients return to active lifestyles.
The Healthcare Market
The healthcare sector is defined as end users
whose primary business is the delivery of medical, patient care or treatment, medical diagnostic services, or medical care provided in
connection with disaster relief, including, but not limited to (i) professional medical and healthcare service companies, businesses,
institutions and enterprises, (ii) medical diagnostics facilities and laboratories having patient interaction, (iii) government and private
organizations providing medical care in connection with disaster relief and (iv) firms selling products or services into such end users.
Examples of such end users are: hospitals, including their pharmacies; integrated medical service provider networks and their member facilities;
surgery centers, including their pharmacies; blood banks; bone and tissue centers; physician and medical clinic offices including their
pharmacies; psychiatric health facilities, including their pharmacies; clinics in retail outlets that perform or provide medical services
or care; long-term medical care facilities, including their pharmacies; medical care components of the Red Cross or other disaster relief
organizations; and dental care facilities.
Services
We provide a full range of diagnostic and surgical
services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves. Orthopedic
and pain procedure services include hip and knee replacement, shoulder reconstruction, fracture care and hand surgery, as well as spinal
surgery.
Our service model is designed to promote referral
relationships, facilitate patient access, and coordinate administration among medical providers, personal injury attorneys, and chiropractors.
This “referral relationship” approach to case management results in increased revenue as attorneys consider the value of our
patient management process when brokering settlements. As EMC and early stage continued care providers, we believe that we have superior
access to patient information to determine the validity of each case and manage cases appropriately.
Revenue is primarily provided by bodily injury
policies, general liability policies, and personal injury protection policies, which partially insulates our business from the declining
reimbursement programs paid from or correlated to Medicare/Medicaid and traditional health insurance companies.
Healthcare Facilities
We currently operate nine facilities, most of
which were opened in the last twenty-four months. As of December 31, 2022, management estimates that the nine facilities are operating
at 35% capacity. We believe that the most important factors relating to the overall utilization of a facility include adequate working
capital, the quality and market position of the facility and the number, quality and specialties of physicians providing patient care
within the facility. Other factors that affect utilization include general and local economic conditions, market penetration, the degree
of outpatient use, the availability of reimbursement programs such as Medicare and Medicaid, and demographic changes such as the growth
in local populations. Utilization across the industry also is being affected by improvements in clinical practice, medical technology
and pharmacology. Current industry trends in utilization and occupancy have been significantly affected by changes in reimbursement policies
of third party payers. We are also unable to predict the extent to which these industry trends will continue or accelerate.
Customers, Sales and Marketing
As of December 31, 2022, we provide services to
approximately 150-180 patients per month at nine facilities. Patients are primarily referred through a growing network of personal injury
attorneys, insurance carriers, physical therapy providers, and chiropractic care providers.
Competition
The health care industry is highly competitive.
In recent years, competition among healthcare providers for patients has intensified in the United States due to, among other things,
regulatory and technological changes, increasing use of managed care payment systems, cost containment pressures and a shift toward outpatient
treatment. In all of the geographical areas in which we operate, there are other facilities that provide services comparable to those
offered by our facilities. In addition, some of our competitors include hospitals that are owned by tax-supported governmental agencies
or by nonprofit corporations and may be supported by endowments and charitable contributions and exempt from property, sale and income
taxes. Such exemptions and support are not available to us.
Certain of our competitors may have greater financial
resources, be better equipped and offer a broader range of services than us. The increase in outpatient treatment and diagnostic facilities,
outpatient surgical centers and freestanding ambulatory surgical also increases competition for us.
The number and quality of the physicians on a
facility’s staff are important factors in determining a facility’s success and competitive advantage. Typically, physicians
are responsible for making admissions decisions and for directing the course of patient treatment. We believe that physicians refer patients
to a facility primarily on the basis of the patient’s needs, the quality of other physicians on the medical staff, the location
of the facility and the breadth and scope of services offered at the facility. We strive to retain and attract qualified doctors by maintaining
high ethical and professional standards and providing adequate support personnel, technologically advanced equipment and facilities that
meet the needs of those physicians.
In addition, we depend on the efforts, abilities,
and experience of our medical support personnel, including our nurses, pharmacists and lab technicians and other health care professionals.
We compete with other health care providers in recruiting and retaining qualified management, nurses and other medical personnel. Our
healthcare facilities are experiencing the effects of a nationwide staffing shortage, which has caused and may continue to cause an increase
in salaries, wages and benefits expense in excess of the inflation rate. In addition, there are requirements to maintain specified nurse-staffing
levels. To the extent we cannot meet those levels, we may be required to limit the healthcare services provided which would have a corresponding
adverse effect on our net operating revenues.
Although most of our revenue is provided by bodily
injury policies, general liability policies, and personal injury protection policies, our ability to negotiate favorable service contracts
with purchasers of group health care services also affects our competitive position and significantly affects the revenues and operating
results of our facilities. Managed care plans attempt to direct and control the use of services and to demand that we accept lower rates
of payment. In addition, employers and traditional health insurers are increasingly interested in containing costs through negotiations
with facilities for managed care programs and discounts from established charges. In return, facilities secure commitments for a larger
number of potential patients. Generally, facilities compete for service contracts with group health care service purchasers on the basis
of price, market reputation, geographic location, quality and range of services, quality of the medical staff and convenience. The importance
of obtaining contracts with managed care organizations varies from market to market depending on the market strength of such organizations.
A key element of our growth strategy is expansion
through opening additional locations and the acquisition of additional facilities in select markets. The competition to acquire healthcare
facilities is significant. We compete for acquisitions with other for-profit healthcare companies, private equity and venture capital
firms, as well as not-for-profit entities. Some of our competitors have greater resources than we do. We intend to selectively seek opportunities
to expand our base of operations by adhering to our disciplined program of rational growth, but may not be successful in accomplishing
acquisitions on favorable terms.
Competitive Strengths
We believe that we have several competitive advantages,
including the following:
| · | Broad array of services focusing on plaintiff related care. We provide a full range
of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles,
ligaments, and nerves with a focus on plaintiff related care. From sports injuries, to sprains, strains, and fractures, orthopedic and
pain procedure services include hip and knee replacement, shoulder reconstruction, fracture care and hand surgery, as well as spinal surgery.
Our service model is designed to promote referral relationships, facilitate patient access, and coordinate administration among medical
providers, personal injury attorneys, and chiropractors. As a result, our revenue is primarily provided by bodily injury policies, general
liability policies, and personal injury protection policies, which partially insulates our business from the declining reimbursement programs
paid from or correlated to Medicare/ Medicaid and traditional health insurance companies. |
| · | Opportunities for accelerated growth. We have a track record of delivering strong growth
through a combination of organic growth, new contract additions and selective acquisitions. Organic growth has historically been supported
by consistent underlying market volume trends, stable pricing and a diversified payor mix. We believe that our networks of high-quality
providers position us to take advantage of these trends. We have successfully executed on new contract growth by providing a set of differentiated
services and delivering integrated, efficient, high-quality care, which has helped us expand our relationships with our existing customers
and compete effectively in the bidding process for new contracts. Additionally, we believe we will have opportunities to expand our services
through acquisitions, as discussed in more detail below. |
| · | Focus on clinical excellence. We are focused on achieving the best clinical outcomes
for our patients through the application of rigorous recruiting and credentialing standards, the promotion of a physician-led leadership
culture and the monitoring of our clinical quality measures. Through extensive clinical and leadership development programs, we train
our healthcare professionals to continually enhance their skills and deliver innovative and patient-focused experiences and outcomes.
We provide internally developed continuing medical education accredited courses to our healthcare professionals, including instructor-led
and on-line education sessions. We have developed and implemented quality measurement systems that track multiple key indicators, which
assist our professionals in systematically monitoring, examining and analyzing outcomes and processes. These quality measurement systems
are supplemented by our active peer review infrastructure designed to ensure the development and implementation of actionable items that
will improve patient outcomes. Our ability to deliver high levels of customer service and patient care is a direct result of this focus,
which helps us to differentiate our services, and to attract and retain providers. |
| · | Ability to attract and retain high-quality providers. Through our processes, we are
able to identify and target high-quality providers to match the needs of our customers. We believe that our operating infrastructure enables
us to provide attractive opportunities for our providers to enhance their skills through extensive clinical and leadership development
programs. We believe that our differentiated recruiting, training and development programs strengthen our customer and provider relationships,
enhance our contract and clinician retention rates and allow us to efficiently recruit providers to support our new contract pipeline. |
Growth Strategies
The key elements of our strategy
to grow our business include:
| · | Capitalize on organic growth opportunities. As noted above, management estimates that
our nine facilities are operating at 35% capacity as if December 31, 2022. Accordingly, we believe that we have an opportunity for organic
growth at our existing facilities. We also believe our physician-led, patient-focused culture and approach to clinical solutions will
allow us to continue to successfully recruit and retain clinical professionals. |
| · | Supplement organic growth with strategic acquisitions. The market in which we compete
is highly fragmented, presenting significant opportunities for additional acquisitions. We will continue to follow a disciplined strategy
in exploring future acquisitions by analyzing the strategic rationale, financial impact and organic growth profile of each potential opportunity.
Our current focus for future acquisitions is MRI imaging, followed by medical billing and outpatient surgery centers. We have been in
discussions with several privately owned MRI facilities. Key targets are strategically located
within our market territory. We believe that the addition of these profitable businesses would be immediately enhanced by significant
additional new business that we would direct to them. |
| · | Enhance operational efficiencies and productivity. We believe there are significant
opportunities to continue to build upon our success in improving our productivity and profitability. We continue to focus on initiatives
to improve productivity, including more efficient scheduling, continued use of mid-level providers, enhancing our leadership training
programs, improving and realigning compensation programs. We believe that our processes related to managed care contracting, billing,
coding, collection and compliance have driven a strong track record of efficient revenue cycle management. We have made significant investments
in infrastructure, including management information systems that we believe will continue to enable us to improve clinical results and
key client metrics while reducing the cost of providing patient care. We have dedicated teams with business and clinical expertise that
are responsible for implementing best practices. Furthermore, we will continue to utilize risk mitigation programs for loss prevention
and early intervention. We believe that our significant investments in scalable technology systems will facilitate additional cost reductions
and efficiencies. |
Intellectual Property
Our healthcare business does not own any intellectual
property.
Employees and Medical Staff
As of December 31, 2022, we had 10 employees.
Our facilities are staffed by licensed physicians who have been admitted to the medical staff of individual facilities. Members of
the medical staffs of our facilities also serve on the medical staffs of facilities not owned by us and may terminate their affiliation
with our facilities at any time. Each of our facilities is managed on a day-to-day basis by a managing director. In addition, a Board
of Governors, including members of the facility’s medical staff, governs the medical, professional and ethical practices at each
facilities. We believe that our relations with our employees are satisfactory.
None of our employees are represented by labor
unions, and we believe that we have an excellent relationship with our employees.
Regulation
The healthcare industry is subject to numerous
laws, regulations and rules including, among others, those related to government healthcare participation requirements, various licensure
and accreditations, reimbursement for patient services, health information privacy and security rules, and Medicare and Medicaid fraud
and abuse provisions (including, but not limited to, federal statutes and regulations prohibiting kickbacks and other illegal inducements
to potential referral sources, false claims submitted to federal or state health care programs and self-referrals by physicians). Providers
that are found to have violated any of these laws and regulations may be excluded from participating in government healthcare programs,
subjected to significant fines or penalties and/or required to repay amounts received from the government for previously billed patient
services. Although we believe our policies, procedures and practices comply with governmental regulations, no assurance can be given that
we will not be subjected to additional governmental inquiries or actions, or that we would not be faced with sanctions, fines or penalties
if so subjected. Even if we were to ultimately prevail, a significant governmental inquiry or action under one of the above laws, regulations
or rules could have a material adverse impact on us.
Licensing, Certification and Accreditation: All
of our facilities are subject to compliance with various federal, state and local statutes and regulations and receive periodic inspection
by state licensing agencies to review standards of medical care, equipment and cleanliness. Our facilities s must also comply with the
conditions of participation and licensing requirements of federal, state and local health agencies, as well as the requirements of municipal
building codes, health codes and local fire departments. Various other licenses and permits are also required in order to dispense narcotics,
operate pharmacies, handle radioactive materials and operate certain equipment. All of our eligible hospitals have been accredited
by The Joint Commission. All of our facilities are certified as providers of Medicare and Medicaid services by the appropriate governmental
authorities. If any of our facilities were to lose its Joint Commission accreditation or otherwise lose its certification under the Medicare
and Medicaid programs, the facility may be unable to receive reimbursement from the Medicare and Medicaid programs and other payers. We
believe our facilities are in substantial compliance with current applicable federal, state, local and independent review body regulations
and standards. The requirements for licensure, certification and accreditation are subject to change and, in order to remain qualified,
it may become necessary for us to make changes in our facilities, equipment, personnel and services in the future, which could have a
material adverse impact on operations.
Certificates of Need: Many
states, including Florida, have enacted certificates of need, or CON, laws as a condition prior to capital expenditures, construction,
expansion, modernization or initiation of major new services. Failure to obtain necessary state approval can result in our inability to
complete an acquisition, expansion or replacement, the imposition of civil or, in some cases, criminal sanctions, the inability to receive
Medicare or Medicaid reimbursement or the revocation of a facility’s license, which could harm our business. In addition, significant
CON reforms have been proposed in a number of states that would increase the capital spending thresholds and provide exemptions of various
services from review requirements. In the past, we have not experienced any material adverse effects from those requirements, but we cannot
predict the impact of these changes upon our operations.
Conversion Legislation: Many
states have enacted or are considering enacting laws affecting the conversion or sale of not-for-profit healthcare facilities to for-profit
entities. These laws generally require prior approval from the attorney general, advance notification and community involvement. In addition,
attorneys general in states without specific conversion legislation may exercise discretionary authority over these transactions. Although
the level of government involvement varies from state to state, the trend is to provide for increased governmental review and, in some
cases, approval of a transaction in which a not-for-profit entity sells a health care facility to a for-profit entity. The adoption of
new or expanded conversion legislation and the increased review of not-for-profit conversions may limit our ability to grow through acquisitions
of not-for-profit facilities.
Utilization Review: Federal
regulations require that admissions and utilization of facilities by Medicare and Medicaid patients must be reviewed in order to ensure
efficient utilization of facilities and services. The law and regulations require Peer Review Organizations, or PROs, to review the appropriateness
of Medicare and Medicaid patient admissions and discharges, the quality of care provided, the validity of diagnosis related group classifications
and the appropriateness of cases of extraordinary length of stay. PROs may deny payment for services provided, assess fines and also have
the authority to recommend to the Department of Health and Human Services, or HHS, that a provider that is in substantial non-compliance
with the standards of the PRO be excluded from participating in the Medicare program. We have contracted with PROs to perform the required
reviews.
Audits: Most healthcare facilities
are subject to federal audits to validate the accuracy of Medicare and Medicaid program submitted claims. If these audits identify
overpayments, we could be required to pay a substantial rebate of prior years’ payments subject to various administrative appeal
rights. The federal government contracts with third-party “recovery audit contractors” and “Medicaid integrity contractors”,
on a contingent fee basis, to audit the propriety of payments to Medicare and Medicaid providers. Similarly, Medicare zone program integrity
contractors target claims for potential fraud and abuse. Additionally, Medicare administrative contractors must ensure they pay the
right amount for covered and correctly coded services rendered to eligible beneficiaries by legitimate providers. The Centers for Medicare
and Medicaid Services announced its intent to consolidate many of these Medicare and Medicaid program integrity functions into new unified
program integrity contractors, though it remains unclear what effect, if any, this consolidation may have. We have undergone claims audits
related to our receipt of federal healthcare payments during the last three years, the results of which have not required material adjustments
to our consolidated results of operations. However, potential liability from future federal or state audits could ultimately exceed established
reserves, and any excess could potentially be substantial. Further, Medicare and Medicaid regulations also provide for withholding
Medicare and Medicaid overpayments in certain circumstances, which could adversely affect our cash flow.
The Stark Law: The Social Security
Act includes a provision commonly known as the “Stark Law.” This law prohibits physicians from referring Medicare and Medicaid
patients to entities with which they or any of their immediate family members have a financial relationship, unless an exception is met.
These types of referrals are known as “self-referrals.” Sanctions for violating the Stark Law include civil penalties up to
$26,125 for each violation, and up to $174,172 for sham arrangements. There are a number of exceptions to the self-referral prohibition,
including an exception for a physician’s ownership interest in an entire facility as opposed to an ownership interest in a facility
department unit, service or subpart. However, federal laws and regulations now limit the ability of facilities relying on this exception
to expand aggregate physician ownership interest or to expand certain facilities. This regulation also places a number of compliance requirements
on physician-owned facilities related to reporting of ownership interest. There are also exceptions for many of the customary financial
arrangements between physicians and providers, including employment contracts, leases and recruitment agreements that adhere to certain
enumerated requirements. The Centers for Medicare and Medicaid Services, or CMS,
issued a final rule in 2020 that created a new Stark exception for value-based models. Although the final regulations provide exceptions
to the Stark Law, there may remain regulatory risks for participating hospitals, as well as financial and operational risks. We monitor
all aspects of our business and have developed a comprehensive ethics and compliance program that is designed to meet or exceed applicable
federal guidelines and industry standards. Nonetheless, because the law in this area is complex and constantly evolving, there can be
no assurance that federal regulatory authorities will not determine that any of our arrangements with physicians violate the Stark Law.
Anti-kickback Statute: A provision
of the Social Security Act known as the “anti-kickback statute” prohibits healthcare providers and others from directly or
indirectly soliciting, receiving, offering or paying money or other remuneration to other individuals and entities in return for using,
referring, ordering, recommending or arranging for such referrals or orders of services or other items covered by a federal or state health
care program. However, changes to the anti-kickback statute have reduced the intent required for violation; one is no longer required
to have actual knowledge or specific intent to commit a violation of the anti-kickback statute in order to be found in violation of such
law. The anti-kickback statute contains certain exceptions, and the Office of the Inspector General of the Department of Health and Human
Services, or the OIG, has issued regulations that provide for “safe harbors,” from the federal anti-kickback statute for various
activities. These activities, which must meet certain requirements, include (but are not limited to) the following: investment interests,
space rental, equipment rental, practitioner recruitment, personnel services and management contracts, sale of practice, referral services,
warranties, discounts, employees, group purchasing organizations, waiver of beneficiary coinsurance and deductible amounts, managed care
arrangements, obstetrical malpractice insurance subsidies, investments in group practices, freestanding surgery centers, donation of technology
for electronic health records and referral agreements for specialty services. In 2020, the OIG issued a final rule that established
an anti-kickback statute safe harbor for value based models. Although the final regulations provide safe harbors, there may remain regulatory
risks for participating facilities, as well as financial and operational risks. The
fact that conduct or a business arrangement does not fall within a safe harbor or exception does not automatically render the conduct
or business arrangement illegal under the anti-kickback statute. However, such conduct and business arrangements may lead to increased
scrutiny by government enforcement authorities. Although we believe that our arrangements with physicians and other referral sources have
been structured to comply with current law and available interpretations, there can be no assurance that all arrangements comply with
an available safe harbor or that regulatory authorities enforcing these laws will determine these financial arrangements do not violate
the anti-kickback statute or other applicable laws. Violations of the anti-kickback statute may be punished by a criminal fine of up to
$100,000 for each violation or imprisonment, however, under 18 U.S.C. Section 3571, this fine may be increased to $250,000 for individuals
and $500,000 for organizations. Civil money penalties may include fines of up to $105,563 per violation and damages of up to three
times the total amount of the remuneration and/or exclusion from participation in Medicare and Medicaid.
Similar State Laws: Many states,
including Florida, have adopted laws that prohibit payments to physicians in exchange for referrals similar to the anti-kickback statute
and the Stark Law, some of which apply regardless of the source of payment for care. These statutes typically provide criminal and civil
penalties as well as loss of licensure. In many instances, the state statutes provide that any arrangement falling in a federal safe harbor
will be immune from scrutiny under the state statutes. However, in most cases, little precedent exists for the interpretation or enforcement
of these state laws. These laws and regulations are extremely complex and, in many cases, we do not have the benefit of regulatory or
judicial interpretation. It is possible that different interpretations or enforcement of these laws and regulations could subject our
current or past practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment,
personnel, services, capital expenditure programs and operating expenses. A determination that we have violated one or more of these laws,
or the public announcement that we are being investigated for possible violations of one or more of these laws, could have a material
adverse effect on our business, financial condition or results of operations and our business reputation could suffer significantly. In
addition, we cannot predict whether other legislation or regulations at the federal or state level will be adopted, what form such legislation
or regulations may take or what their impact on us may be. If we are deemed to have failed to comply with the anti-kickback statute, the
Stark Law or other applicable laws and regulations, we could be subjected to liabilities, including criminal penalties, civil penalties
(including the loss of our licenses to operate one or more facilities), and exclusion of one or more facilities from participation in
the Medicare, Medicaid and other federal and state health care programs. The imposition of such penalties could have a material adverse
effect on our business, financial condition or results of operations.
Federal False Claims Act and Similar State
Regulations: A current trend affecting the health care industry is the increased use of the federal False Claims Act, and,
in particular, actions being brought by individuals on the government’s behalf under the False Claims Act’s qui tam, or whistleblower,
provisions. Whistleblower provisions allow private individuals to bring actions on behalf of the government by alleging that the defendant
has defrauded the Federal government. When a defendant is determined by a court of law to have violated the False Claims Act, the defendant
may be liable for up to three times the actual damages sustained by the government, plus mandatory civil penalties of between $12,537
to $25,076 for each separate false claim. There are many potential bases for liability under the False Claims Act. Liability often arises
when an entity knowingly submits a false claim for reimbursement to the federal government. The Fraud Enforcement and Recovery Act of
2009, or FERA, amended and expanded the number of actions for which liability may attach under the False Claims Act, eliminating requirements
that false claims be presented to federal officials or directly involve federal funds. FERA also clarifies that a false claim violation
occurs upon the knowing retention, as well as the receipt, of overpayments. In addition, recent changes to the anti-kickback statute have
made violations of that law punishable under the civil False Claims Act. Further, a number of states have adopted their own false claims
provisions as well as their own whistleblower provisions whereby a private party may file a civil lawsuit on behalf of the state in state
court. The False Claims Act require that federal healthcare program overpayments be returned within 60 days from the date the overpayment
was identified, or by the date any corresponding cost report was due, whichever is later. Failure to return an overpayment within this
period may result in additional civil False Claims Act liability.
Other Fraud and Abuse Provisions: The
Social Security Act also imposes criminal and civil penalties for submitting false claims to Medicare and Medicaid. False claims include,
but are not limited to, billing for services not rendered, billing for services without prescribed documentation, misrepresenting actual
services rendered in order to obtain higher reimbursement and cost report fraud. Like the anti-kickback statute, these provisions are
very broad. Further, the Health Insurance Portability and Accountability Act of 1996,, or HIPAA, broadened the scope of the fraud and
abuse laws by adding several criminal provisions for health care fraud offenses that apply to all health benefit programs, whether or
not payments under such programs are paid pursuant to federal programs. HIPAA also introduced enforcement mechanisms to prevent fraud
and abuse in Medicare. There are civil penalties for prohibited conduct, including, but not limited to billing for medically unnecessary
products or services.
HIPAA Administrative Simplification and
Privacy Requirements: The administrative simplification provisions of HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act, or HITECH, require the use of uniform electronic data transmission standards for health care claims
and payment transactions submitted or received electronically. These provisions are intended to encourage electronic commerce in the health
care industry. HIPAA also established federal rules protecting the privacy and security of personal health information. The privacy and
security regulations address the use and disclosure of individual health care information and the rights of patients to understand and
control how such information is used and disclosed. Violations of HIPAA can result in both criminal and civil fines and penalties. We
believe that we are in material compliance with the privacy regulations of HIPAA, as we continue to develop training and revise procedures
to address ongoing compliance. The HIPAA security regulations require health care providers to implement administrative, physical and
technical safeguards to protect the confidentiality, integrity and availability of patient information. HITECH has since strengthened
certain HIPAA rules regarding the use and disclosure of protected health information, extended certain HIPAA provisions to business associates,
and created new security breach notification requirements. HITECH has also extended the ability to impose civil money penalties on providers
not knowing that a HIPAA violation has occurred. We believe that we have been in substantial compliance with HIPAA and HITECH requirements
to date. Recent changes to the HIPAA regulations may result in greater compliance requirements for healthcare providers, including expanded
obligations to report breaches of unsecured patient data, as well as create new liabilities for the actions of parties acting as business
associates on our behalf.
Red Flags Rule: In addition,
the Federal Trade Commission, or the FTC, Red Flags Rule requires financial institutions and businesses maintaining accounts to address
the risk of identity theft. The Red Flag Program Clarification Act of 2010, signed on December 18, 2010, appears to exclude certain
healthcare providers from the Red Flags Rule, but permits the FTC or relevant agencies to designate additional creditors subject to the
Red Flags Rule through future rulemaking if the agencies determine that the person in question maintains accounts subject to foreseeable
risk of identity theft. Compliance with any such future rulemaking may require additional expenditures in the future.
Patient Safety and Quality Improvement Act
of 2005: On July 29, 2005, the Patient Safety and Quality Improvement Act of 2005 was enacted, which has the goal of
reducing medical errors and increasing patient safety. This legislation establishes a confidential reporting structure in which providers
can voluntarily report patient safety work product, or PSWP, to patient safety organizations, or PSOs. Under the system, PSWP is made
privileged, confidential and legally protected from disclosure. PSWP does not include medical, discharge or billing records or any other
original patient or provider records but does include information gathered specifically in connection with the reporting of medical errors
and improving patient safety. This legislation does not preempt state or federal mandatory disclosure laws concerning information that
does not constitute PSWP. PSOs are certified by the Secretary of the HHS for three-year periods and analyze PSWP, provide feedback to
providers and may report non-identifiable PSWP to a database. In addition, PSOs are expected to generate patient safety improvement strategies.
Environmental Regulations: Our
healthcare operations generate medical waste that must be disposed of in compliance with federal, state and local environmental laws,
rules and regulations. Infectious waste generators, including healthcare facilities, face substantial penalties for improper disposal
of medical waste, including civil penalties of up to $25,000 per day of noncompliance, criminal penalties of up to $50,000 per day, imprisonment,
and remedial costs. In addition, our operations, as well as our purchases and sales of facilities are subject to various other environmental
laws, rules and regulations. We believe that our disposal of such wastes is in material compliance with all state and federal laws.
Corporate Practice of Medicine: Several
states, including Florida, have laws and/or regulations that prohibit corporations and other entities from employing physicians and practicing
medicine for a profit or that prohibit certain direct and indirect payments or fee-splitting arrangements between health care providers
that are designed to induce or encourage the referral of patients to, or the recommendation of, particular providers for medical products
and services. Possible sanctions for violation of these restrictions include loss of license and civil and criminal penalties. In addition,
agreements between the corporation and the physician may be considered void and unenforceable. These statutes and/or regulations vary
from state to state, are often vague and have seldom been interpreted by the courts or regulatory agencies. We do not expect these state
corporate practice of medicine proscriptions to significantly affect our operations. Many states have laws and regulations which prohibit
payments for referral of patients and fee-splitting with physicians. We do not make any such payments or have any such arrangements.
Health Care Industry Investigations: We
are subject to claims and suits in the ordinary course of business, including those arising from care and treatment afforded by our facilities
and are party to various government investigations and litigation. In addition, currently, and from time to time, some of our facilities
are subjected to inquiries and/or actions and receive notices of potential non-compliance of laws and regulations from various federal
and state agencies. Providers that are found to have violated these laws and regulations may be excluded from participating in government
healthcare programs, subjected to potential licensure, certification, and/or accreditation revocation, subjected to fines or penalties
or required to repay amounts received from the government for previously billed patient services. We monitor all aspects of our business
and have developed a comprehensive ethics and compliance program that is designed to meet or exceed applicable federal guidelines and
industry standards. Because the law in this area is complex and constantly evolving, governmental investigation or litigation may result
in interpretations that are inconsistent with industry practices, including ours. Although we believe our policies, procedures and practices
comply with governmental regulations, no assurance can be given that we will not be subjected to inquiries or actions, or that we will
not be faced with sanctions, fines or penalties in connection with the investigations. Even if we were to ultimately prevail, the government’s
inquiry and/or action in connection with these matters could have a material adverse effect on our future operating results. It is possible
that governmental entities could initiate additional investigations or litigation in the future and that such matters could result in
significant penalties as well as adverse publicity. It is also possible that our executives and/or managers could be included as targets
or witnesses in governmental investigations or litigation and/or named as defendants in private litigation.
Medical Malpractice Tort Law Reform: Medical
malpractice tort law has historically been maintained at the state level. All states have laws governing medical liability lawsuits. Over
half of the states have limits on damages awards. Almost all states have eliminated joint and several liability in malpractice lawsuits,
and many states have established limits on attorney fees. Many states had bills introduced in their legislative sessions to address medical
malpractice tort reform. Proposed solutions include enacting limits on non-economic damages, malpractice insurance reform, and gathering
lawsuit claims data from malpractice insurance companies and the courts for the purpose of assessing the connection between malpractice
settlements and premium rates. Reform legislation has also been proposed, but not adopted, at the federal level that could preempt additional
state legislation in this area.
Financial Services (Tax Resolution) Business
Our financial services business is operated by
Platinum Tax, which we acquired on July 31, 2018. This business accounted for approximately 11% and 43% of our revenues for the years
ended December 31, 2022 and 2021, respectively.
Overview
Platinum Tax is a full-service tax resolution
firm located in Los Angeles, California. Since 2011, we have been assisting all types of taxpayers resolve any and all issues with the
IRS and applicable state tax agencies. We provide fee-based tax resolution services to individuals and companies that have federal and
state tax liabilities by assisting clients to settle outstanding tax debts.
Services
We provide fee-based tax resolution services to
individuals and companies that have federal and state tax liabilities by assisting clients to settle outstanding tax debts. Specifically,
our tax relief services include, but are not limited to, back taxes, offer in compromise, audit representation, amending tax returns,
tax preparation, tax resolution, wage garnishment relief, removal of bank levies and liens, bookkeeping, and resolution of other financial
challenges. We have a team of 10 members which includes tax attorneys, accountants, and enrolled agents that have resolved tax issues
for thousands of clients.
Customers, Sales and Marketing
Our clients primarily include individuals and
companies that have federal and state tax liabilities. Since inception, our knowledgeable tax resolution experts have resolved tax issues
for thousands of clients nationwide. No single customer accounted for more than 10% of our revenue for the years ended December 31, 2022
and 2021.
Our marketing efforts include the use the radio,
television and the internet to advertise help for taxpayers in distress.
Competition
The tax resolution industry is highly competitive.
We face substantial competition from other local, regional and national tax relief companies, such as Optima Tax Relief,
Precision Tax Relief, Anthem Tax Services, Fortress Tax Relief, Community Tax, Enterprise Consultants Group, Tax Defense Network,
and ALG Tax Solutions. Most of our competitors have greater financial resources, are better equipped and offer a broader range of
services than we do.
Intellectual Property
Our financial services business does not own any
intellectual property.
Employees
As of December 31, 2022, we had 5 employees. None
of our employees are represented by labor unions, and we believe that we have an excellent relationship with our employees.
Regulation
We are subject to various additional federal,
state and local laws and regulations, including, without limitation, in the areas of labor, immigration, marketing and advertising, consumer
protection, financial services, income tax preparation, privacy and data security, anti-competition, environmental, health and safety,
insurance, and healthcare. There have been significant new or proposed regulations and/or heightened focus by the government and others
in some of these areas, including, for example, related to privacy and data security, consumer financial services, endorsements and testimonials,
telemarketing, restrictive covenants, and labor, including overtime and exemption regulations, state and local laws on minimum wage, worker
classification, and other labor-related issues. We work to comply with those laws that are applicable to us or our services, and we continue
to monitor developments in the regulatory environment in which we operate.
From time to time, we receive inquiries from governmental
authorities regarding the applicability of laws to our services and products and other matters relating to our business. We cannot predict
what effect future laws, changes in interpretations of existing laws or the results of future governmental inquiries with respect to services
or other matters relating to our business may have on our consolidated financial position, results of operations and cash flows.
Real Estate Business
Our real estate business is operated by Edge View,
which we acquired on July 16, 2014. This business accounted for approximately 0% and 2% of our revenues for the years ended December 31,
2022 and 2021, respectively.
Our Property
We own five (5) acres zoned medium density residential
(MDR) with 12 lots already platted; six (6) acres zoned high-density residential (HDR) that can be platted in various configurations
to meet current housing needs; and twelve (12) acres zoned in Lemhi County as Agriculture that is available for further annexation into
the City of Salmon for development, as well as a common area for landowners to view wildlife, provide access to the Salmon River and fishing
in a two (2) acre pond. Salmon is known as Idaho’s premier whitewater destination as well as one of the easier accesses
to the Frank Church Wilderness Area - the largest wilderness in the lower 48 states. Salmon’s airport has service to Boise,
Idaho and serves as a hub to access whitewater rafting start points and wilderness landing strips. Management has invested years working
to develop a new and exciting housing development in Salmon, Idaho and plans to enter into a joint venture agreement with a developer
for this planned concept development.
Intellectual Property
Edge View does not own any intellectual property.
Employees
Edge View does not have any employees.
Regulation
Federal, State and/or Local Regulatory Compliance
We are subject to a variety of Federal, state,
and/or local statutes, ordinances, rules, and regulations covering the purchase, development, construction and operation of real estate
assets. These regulatory requirements include zoning and land use, building design, construction, worksite safety, traffic, and other
matters, such as local rules that may impose restrictive zoning and developmental requirements. We are subject to various licensing, registration,
and filing requirements in connection with our real estate assets. Finally, state and/or local governments retain certain rights with
respect to eminent domain which could enable them to restrict or alter the use of our property. These requirements may lead to increases
in our overall costs. The need to comply with these requirements may significantly delay development and/or construction with regard to
our properties, or lead us to alter our plans regarding our real estate assets.
Environmental Regulatory Compliance
Under various Federal, state and/or local laws,
ordinances and regulations, a current or previous owner or operator of a property may be required to investigate and/or clean-up hazardous
or toxic substances released at that property. That owner or operator also may be held liable to third parties for bodily injury or property
damage (investigation and/or clean-up costs) incurred by those parties in connection with the contamination at that site. These laws often
impose liability without regard to whether the owner or operator knew of or otherwise caused the release of the hazardous or toxic substances.
In addition, persons who arrange for the disposal or treatment of hazardous substances or other regulated materials also may be liable
for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned
or operated by such persons.
The costs of remediation or removal of hazardous
or toxic substances can be substantial, and the presence of contamination, or the failure to remediate contamination discovered, at a
property we own or operate may adversely affect our ability to develop, construct on, sell, lease, or borrow upon that property.
In addition, our properties may be exposed to
a risk of contamination originating from other sources. While a property owner generally is not responsible for remediating contamination
that has migrated on-site from an off-site source, the contaminant’s presence could have adverse effects on our ability to develop,
construct on, operate, sell, lease, or borrow upon that property. Certain environmental laws may create a lien on a contaminated site
in favor of the government for damages and costs the government may incur to remediate that contamination. Moreover, if contamination
is discovered on a property, environmental laws may impose restrictions on the manner in which that property may be used, or how businesses
may be operated on that property, thus reducing our ability to maximize our investment in that property. Our properties have been subjected
to varying degrees of environmental assessment at various times; however, the identification of new areas of contamination, a change in
the extent or known scope of contamination, or changes in environmental regulatory standards and/or cleanup requirements could result
in significant costs to us.
An investment in our securities involves a
high degree of risk. You should carefully read and consider all of the risks described below, together with all of the other information
contained or referred to in this report, before making an investment decision with respect to our securities. If any of the following
events occur, our financial condition, business and results of operations (including cash flows) may be materially adversely affected.
In that event, the market price of our shares could decline, and you could lose all or part of your investment.
Risks Related to Our Business and Structure
We have incurred losses since our inception,
and we may not be able to manage our business on a profitable basis.
We have generated losses since inception and have
relied on cash on hand, sales of securities, advances from stockholders and third-party and related party debt to support our operations.
For the year ended December 31, 2022, we had a net loss of $4,623,521. Although revenue from our portfolio companies has increased since
2001, there is no guarantee that we will be successful in realizing revenues or in achieving or sustaining positive cash flow at any
time in the future. Any such failure could result in the possible closure of our business or force us to seek additional capital through
loans or additional sales of our equity securities to continue business operations, which would dilute the value of any shares you hold
and could result in the loss of your entire investment.
The report of our independent registered public
accounting firm included a “going concern” explanatory paragraph.
Although our audited financial statements for the year ended December
31, 2022 were prepared under the assumption that we would continue our operations as a going concern, the report of our independent registered
public accounting firm that accompanies our financial statements for the year ended December 31, 2022 contains an explanatory paragraph
relating to our ability to continue as a going concern due to the fact that we have sustained net loss since inception and have accumulated
and working capital deficits. As of December 31, 2022, we had an accumulated deficit of $73.54 million and a working capital deficit
of approximately $3.14 million.
However, management believes, based on our operating
plan, that current working capital and current and expected additional financing is sufficient to fund operations and satisfy our obligations
as they come due for at least one year from the financial statement issuance date. However, we do
believe additional funds are required to execute our business plan and our strategy of acquiring additional businesses. The funds required
to execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business
deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase
price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of
our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan
on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or our
equity or equity in one of our subsidiaries) ranges between $2 million to $5 million. If, and to the extent, that sellers are unwilling
to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan
could be as much as $10 million.
Although we do not believe that we will require
additional cash to continue our operations over the next twelve months, there are no assurances that we will be able to raise our revenues
to a level which supports profitable operations and provides sufficient funds to pay obligations in the future. Our prior losses have
had, and will continue to have, an adverse effect on our financial condition. In addition, continued operations and our ability to acquire
additional businesses may be dependent on our ability to obtain additional financing in the future, and there are no assurances that such
financing will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do
not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the
future through our operations, financings or from other sources or transactions, we will exhaust our resources and will be unable to continue
operations. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in our company.
The effect of the COVID-19 pandemic on our
operations has had, and is expected to continue to have, a negative effect on our business, financial condition, cash flows and results
of operations.
The COVID-19 pandemic continues to rapidly evolve.
The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, and we have experienced
and expect to continue to experience unpredictable reductions in demand for certain of our services.
Due to the COVID-19 pandemic, client enrollment
at Platinum Tax has been at a slower pace than initially expected. In addition, during 2022, Platinum Tax experienced reduced enrollment
due to governmental policy. As a result, the performance of Platinum Tax was effected and the pandemic had a material adverse impact on
its market share growth plans and timelines. Additionally, in accordance with recommendations from public health officials to mitigate
the spread of COVID-19, we have during periods of 2020 temporarily closed certain operations for several months. All operations are now
open and functioning. Our results will be adversely impacted by any new closures and other actions taken to contain or treat the impact
of COVID-19, and the extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted.
Furthermore, the global deterioration in economic
conditions, which may have an adverse impact on discretionary consumer spending or investing, could also impact our business and demand
for our services. For instance, consumer spending and investing may be negatively impacted by general macroeconomic conditions, including
a rise in unemployment, and decreased consumer confidence resulting from the pandemic.
Our efforts to help mitigate the negative impact
of the outbreak on our business may not be effective, and we may be affected by a protracted economic downturn. Furthermore, while many
governmental authorities around the world have and continue to enact legislation to address the impact of COVID-19, including measures
intended to mitigate some of the more severe anticipated economic effects of the virus, we may not benefit from such legislation, or such
legislation may prove to be ineffective in addressing COVID-19’s impact on our and our customer’s businesses and operations.
Even after the COVID-19 outbreak has subsided, we may continue to experience impacts to our business as a result of COVID-19’s global
economic impact and any recession that has occurred or may occur in the future. Further, as the COVID-19 situation is unprecedented and
continuously evolving, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or in
a manner that we currently do not consider that may present significant risks to our operations.
The extent to which the COVID-19 pandemic may
impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus.
Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global
supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations
and cash flows. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect
of heightening many of the other risks described in this “Risk Factors” section.
Our acquisition strategy exposes us to substantial
risk.
Our acquisition of companies is subject to substantial
risk, including but not limited to the failure to identify material problems during due diligence (for which we may not be indemnified
post-closing), the risk of over-paying for assets (or not making acquisitions on an accretive basis), the ability to obtain or retain
customers and the risks of entering markets where we have limited experience. While we perform due diligence on prospective acquisitions,
we may not be able to discover all potential operational deficiencies in such entities.
Our prior and future businesses may not perform
as expected or the returns from such businesses may not support the financing utilized to acquire them or maintain them. Furthermore,
integration and consolidation of acquired businesses requires substantial human, financial and other resources and may divert management’s
attention from our existing business concerns, disrupt our ongoing business or not be successfully integrated. Even if we consummate businesses
that we believe will be accretive, those businesses may in fact result in a decrease in revenues as a result of incorrect assumptions
in our evaluation of such businesses, unforeseen consequences, or other external events beyond our control. Furthermore, if we consummate
any future acquisitions, our capitalization and results of operations may change significantly, and stockholders will generally not have
the opportunity to evaluate the economic, financial, and other relevant information that we will consider in determining the application
of these funds and other resources. As a result, the consummation of acquisitions may have a material adverse effect on our business,
financial condition, results of operations and cash flows.
We may experience difficulty as we evaluate,
acquire and integrate businesses that we may acquire, which could result in drains on our resources, including the attention of our management,
and disruptions of our on-going business.
We acquire small to mid-sized businesses in various
industries. Generally, because such businesses are privately held, we may experience difficulty in evaluating potential target businesses
as much of the information concerning these businesses is not publicly available. Therefore, our estimates and assumptions used to evaluate
the operations, management and market risks with respect to potential target businesses may be subject to various risks and uncertainties.
Further, the time and costs associated with identifying and evaluating potential target businesses may cause a substantial drain on our
resources and may divert our management team’s attention away from the operations of our businesses for significant periods of time.
In addition, we may have difficulty effectively
integrating and managing acquisitions. The management or improvement of businesses we acquire may be hindered by a number of factors,
including limitations in the standards, controls, procedures and policies implemented in connection with such acquisitions. Further, the
management of an acquired business may involve a substantial reorganization of the business’ operations resulting in the loss of
employees and customers or the disruption of our ongoing businesses. We may experience greater than expected costs or difficulties relating
to an acquisition, in which case, we might not achieve the anticipated returns from any particular acquisition.
We may not be able to effectively integrate
the businesses that we acquire.
Our ability to realize the anticipated benefits
of acquisitions will depend on our ability to integrate those businesses with our own. The combination of multiple independent businesses
is a complex, costly and time-consuming process and there can be no assurance that we will be able to successfully integrate businesses
into our business, or if such integration is successfully accomplished, that such integration will not be costlier or take longer than
presently contemplated. Integration of future acquisitions may include various risks and uncertainties, including the factors discussed
in the paragraph below. If we cannot successfully integrate and manage the businesses within a reasonable time, we may not be able to
realize the potential and anticipated benefits of such acquisitions, which could have a material adverse effect on our stock price, business,
cash flows, results of operations and financial position.
We will consider acquisitions that we believe
will complement, strengthen and enhance our growth. We evaluate opportunities on a preliminary basis from time to time, but these transactions
may not advance beyond the preliminary stages or be completed. Such acquisitions are subject to various risks and uncertainties, including:
| · | the inability to integrate effectively the operations, products, technologies and personnel of the acquired
companies (some of which are in diverse geographic regions) and achieve expected synergies; |
| · | the potential disruption of existing business and diversion of management’s attention from day-to-day
operations; |
| · | the inability to maintain uniform standards, controls, procedures and policies; |
| · | the need or obligation to divest portions of the acquired companies; |
| · | the potential failure to identify material problems and liabilities during due diligence review of acquisition
targets; |
| · | the potential failure to obtain sufficient indemnification rights to fully offset possible liabilities
associated with acquired businesses; and |
| · | the challenges associated with operating in new geographic regions. |
Failure to manage our growing and changing
business could have a material adverse effect on our business, prospects, financial condition, and results of operations.
As we grow, we expect to encounter additional
challenges to our internal processes, capital commitment process, and acquisition funding and financing capabilities. Our existing operations,
personnel, systems, and internal control may not be adequate to support our growth and expansion and may require us to make additional
unanticipated investments in our infrastructure. To manage the future growth of our operations, we will be required to improve our administrative,
operational, and financial systems, procedures, and controls, and maintain, expand, train, and manage our growing employee base. If we
are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute our business strategies
successfully or respond to competitive pressures. As a result, our business, prospects, financial condition, and results of operations
could be materially and adversely affected.
We face competition for businesses that
fit our acquisition strategy and, therefore, we may have to acquire targets at sub-optimal prices or, alternatively, forego certain acquisition
opportunities.
We have been formed to acquire and manage small
to mid-sized businesses. In pursuing such acquisitions, we expect to face strong competition from a wide range of other potential purchasers.
Although the pool of potential purchasers for such businesses is typically smaller than for larger businesses, those potential purchasers
can be aggressive in their approach to acquiring such businesses. Furthermore, we expect that we may need to use third-party financing
in order to fund some or all of these potential acquisitions, thereby increasing our acquisition costs. To the extent that other potential
purchasers do not need to obtain third-party financing or are able to obtain such financing on more favorable terms, they may be in a
position to be more aggressive with their acquisition proposals. As a result, in order to be competitive, our acquisition proposals may
need to be aggressively priced, including at price levels that exceed what we originally determined to be fair or appropriate. Alternatively,
we may determine that we cannot pursue on a cost-effective basis what would otherwise be an attractive acquisition opportunity.
We may not be able to successfully fund
acquisitions due to the unavailability of equity or debt financing on acceptable terms, which could impede the implementation of our acquisition
strategy.
We finance acquisitions primarily through additional
equity and debt financings. Because the timing and size of acquisitions cannot be readily predicted, we may need to be able to obtain
funding on short notice to benefit fully from attractive acquisition opportunities. The sale of additional shares of any class of equity
will be subject to market conditions and investor demand for such shares at prices that may not be in the best interest of our stockholders.
The sale of additional equity securities could also result in dilution to our stockholders. The incurrence of indebtedness would result
in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations.
Financing may not be available in amounts or on terms acceptable to us, if at all. These risks may materially adversely affect our ability
to pursue our acquisition strategy.
We may change our management and acquisition
strategies without the consent of our stockholders, which may result in a determination by us to pursue riskier business activities.
We may change our strategy at any time without
the consent of our stockholders, which may result in our acquiring businesses or assets that are different from, and possibly riskier
than, the strategy described in this prospectus. A change in our strategy may increase our exposure to interest rate and currency fluctuations,
subject us to regulation under the Investment Company Act or subject us to other risks and uncertainties that affect our operations and
profitability.
We are a holding company and rely on distributions
and other payments, advances, and transfers of funds from our subsidiaries to meet our obligations.
Our primary business is the holding and managing
of controlling interests our operating businesses. Therefore, we will be dependent upon the ability of our businesses to generate cash
flows and, in turn, distribute cash to us in the form of distributions, advances and other transfers of funds to enable us to satisfy
our financial obligations. The ability of our businesses to make payments to us may also be subject to limitations under laws of the jurisdictions
in which they are incorporated or organized.
In the future, we may seek to enter into
credit facilities to help fund our acquisition capital and working capital needs. These credit facilities may expose us to additional
risks associated with leverage and may inhibit our operating flexibility.
We may seek to enter into credit facilities with
third-party lenders to help fund our acquisitions. Such credit facilities will likely require us to pay a commitment fee on the undrawn
amount and will likely contain a number of affirmative and restrictive covenants. If we violate any such covenants, our lenders could
accelerate the maturity of any debt outstanding. Such debt may be secured by our assets, including the stock we may own in businesses
that we acquire and the rights we have under intercompany loan agreements that we may enter into with our businesses. Our ability to meet
our debt service obligations may be affected by events beyond our control and will depend primarily upon cash produced by businesses that
we currently manage and may acquire in the future and distributed or paid to us. Any failure to comply with the terms of our indebtedness
may have a material adverse effect on our financial condition.
In addition, we expect that such credit facilities
will bear interest at floating rates which will generally change as interest rates change. We will bear the risk that the rates that we
are charged by our lenders will increase faster than we can grow the cash flow from our businesses or businesses that we may acquire in
the future, which could reduce profitability, materially adversely affect our ability to service our debt, cause us to breach covenants
contained in our third-party credit facilities and reduce cash flow available for distribution.
The loss of the services of the current
officers and directors could severely impact our business operations and future development, which could result in a loss of revenues
and one’s ability to ever sell any shares.
Our performance is substantially dependent upon
the professional expertise of the current officers and board of directors. Each has extensive expertise in business development and acquisitions,
and we are dependent on their abilities. If they are unable to perform their duties, this could have an adverse effect on business operations,
financial condition, and operating results if we are unable to replace them with other individuals qualified to develop and market our
business. The loss of their services could result in a loss of revenues, which could result in a reduction of the value of any shares
you hold as well as the complete loss of your investment.
Our future success is dependent on the management
teams of our businesses, the loss of any of whom could materially adversely affect our financial condition, business and results of operations.
The future success of our existing and future
businesses depends on the respective management teams of those businesses because we intend to operate our businesses on a stand-alone
basis, primarily relying on their existing management teams for day-to-day operations. Consequently, their operational success, as well
as the success of any organic growth strategy, will be dependent on the continuing efforts of the management teams of our businesses.
We will seek to provide these individuals with equity incentives and to have employment agreements with certain persons we have identified
as key to their businesses. However, these measures may not prevent these individuals from leaving their employment. The loss of services
of one or more of these individuals may materially adversely affect our financial condition, business and results of operations.
We may engage in a business transaction
with one or more target businesses that have relationships with our executive officers, our directors, or any of their respective affiliates,
which may create or present conflicts of interest.
We may decide to engage in a business transaction
with one or more target businesses with which our executive officers, our directors, or any of their respective affiliates, have a relationship,
which may create or present conflicts of interest. Regardless of whether we obtain a fairness opinion from an independent investment banking
firm with respect to such a transaction, conflicts of interest may still exist with respect to a particular acquisition and, as a result,
the terms of the acquisition of a target business may not be as advantageous to our shareholders as it would have been absent any conflicts
of interest.
The operational objectives and business
plans of our businesses may conflict with our operational and business objectives or with the plans and objective of another business
we own and operate.
Our businesses operate in different industries
and face different risks and opportunities depending on market and economic conditions in their respective industries and regions. A business’
operational objectives and business plans may not be similar to our objectives and plans or the objectives and plans of another business
that we own and operate. This could create competing demands for resources, such as management attention and funding needed for operations
or acquisitions, in the future.
If, in the future, we cease to control and
operate our businesses or other businesses that we acquire in the future or engage in certain other activities, we may be deemed to be
an investment company under the Investment Company Act.
We have the ability to make investments in businesses
that we will not operate or control. If we make significant investments in businesses that we do not operate or control, or that we cease
to operate or control, or if we commence certain investment-related activities, we may be deemed to be an investment company under the
Investment Company Act. Our decision to sell a business will be based upon financial, operating and other considerations rather than a
plan to complete a sale of a business within any specific time frame. If we were deemed to be an investment company, we would either have
to register as an investment company under the Investment Company Act, obtain exemptive relief from the Securities and Exchange Commission,
or the SEC, or modify our investments or organizational structure or our contract rights to fall outside the definition of an investment
company. Registering as an investment company could, among other things, materially adversely affect our financial condition, business
and results of operations, materially limit our ability to borrow funds or engage in other transactions involving leverage and require
us to add directors who are independent of us and otherwise will subject us to additional regulation that will be costly and time-consuming.
We have identified material weaknesses in
our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not
be able to accurately report our financial results and prevent fraud. As a result, current and potential shareholders could lose confidence
in our financial statements, which would harm the trading price of our common shares.
Companies that file reports with the SEC, including
us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish
and maintain a system of internal control over financial reporting and annual reports on Form 10-K filed under the Securities Exchange
Act of 1934, as amended, or the Exchange Act, to contain a report from management assessing the effectiveness of a company’s internal
control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010, public companies that are large accelerated filers or accelerated filers must include in their annual reports on Form 10-K an
attestation report of their regular auditors attesting to and reporting on management’s assessment of internal control over financial
reporting. Non-accelerated filers and smaller reporting companies, like us, are not required to include an attestation report of their
auditors in annual reports.
A report of our management is included under Item
9A “Controls and Procedures.” We are a smaller reporting company and, consequently, are not required to include
an attestation report of our auditor in our annual report. However, if and when we become subject to the auditor attestation requirements
under SOX 404, we can provide no assurance that we will receive a positive attestation from our independent auditors.
During its evaluation of the effectiveness of
internal control over financial reporting as of December 31, 2022, management identified material weaknesses. These material weaknesses
were associated with our lack of (i) controls in place to ensure that all disclosures required were originally addressed in our consolidated
financial statements, (ii) formal documentation over internal control procedures and environment, (iii) proper segregation of duties and
multiple level of reviews and (iv) expertise in accounting of derivative liabilities. We also have not developed and effectively
communicated our accounting policies and procedures to our employees. We are undertaking remedial measures, which measures will take time
to implement and test, to address these material weaknesses. There can be no assurance that such measures will be sufficient to remedy
the material weaknesses identified or that additional material weaknesses or other control or significant deficiencies will not be identified
in the future. If we continue to experience material weaknesses in our internal controls or fail to maintain or implement required new
or improved controls, such circumstances could cause us to fail to meet our periodic reporting obligations or result in material misstatements
in our financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation
reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead to a decline
in our stock price.
Risks Related to Our Healthcare Business
Our ability to grow our business through
organic expansion either by developing new facilities or by modifying existing facilities is dependent upon many factors.
Our ability to grow our business through organic
expansion is dependent on capacity and occupancy at our facilities. Should our facilities reach maximum occupancy, we may need to implement
other growth strategies either by developing new facilities or by modifying existing facilities.
Our facilities typically need to be purpose-designed
in order to enable the type and quality of service that we provide. Consequently, we must either develop sites to create facilities or
purchase or lease existing facilities, which may require substantial modification. We must be able to identify suitable sites and there
is no guarantee that such sites will be available at all, or at an economically viable cost or in areas of sufficient demand for our services.
The subsequent successful development and construction of a new facility is contingent upon, among other things, negotiation of construction
contracts, regulatory permits and planning consents and satisfactory completion of construction. Similarly, our ability to expand existing
facilities is also dependent upon various factors, including identification of appropriate expansion projects, permitting, licensure,
financing, integration into our relationships with payors and referral sources, and margin pressure as new facilities are filled with
patients.
Delays caused by difficulties in respect of any
of the above factors may lead to cost overruns and longer periods before a return is generated on an investment, if at all. We may incur
significant capital expenditure but due to a regulatory, planning or other reason, may find that we are prevented from opening a new facility
or modifying an existing facility. Moreover, even when incurring such development capital expenditure, there is no guarantee that we can
fill beds when they become available. Upon operational commencement of a new facility, we typically expect that it will take approximately
12-18 months to reach our targeted occupancy level. Any delays or stoppages in our projects, the unsatisfactory completion or construction
of such projects or the failure of such projects to increase our occupancy levels could have a material adverse effect on our business,
results of operations and financial condition.
Changes to payment rates or methods of third-party
payors, including government healthcare programs, changes to the laws and regulations that regulate payments for medical services, the
failure of payment rates to increase as our costs increase, or changes to our payor mix, could adversely affect our operating margins
and revenues.
Our revenue is primarily provided by bodily injury
policies, general liability policies, and personal injury protection policies, which partially insulates our business from the declining
reimbursement programs paid from or correlated to Medicare/Medicaid and traditional health insurance companies. However, we do also depend
on private and governmental third-party sources of payment for the services provided to patients and assume financial risks related to
changes in third-party reimbursement rates and changes in payor mix. In some cases, our revenue decreases if our volume or reimbursement
decreases, but our expenses, including physician compensation, may not decrease proportionately.
The amount we receive for our services may be
adversely affected by market and cost factors as well as other factors over which we have no control, including changes to the Medicare
and Medicaid payment systems. Health reform efforts at the federal and state levels may increase the likelihood of significant changes
affecting government healthcare programs and private insurance coverage. Government healthcare programs are subject to, among other things,
statutory and regulatory changes, administrative rulings, interpretations and determinations concerning patient eligibility requirements,
funding levels and the method of calculating payments or reimbursements, all of which could materially increase or decrease payments we
receive from these government programs. Further, Medicare reimbursement rates are increasingly used by private payors as benchmarks to
establish commercial reimbursement rates and any adjustment in Medicare reimbursement rates may impact our reimbursement rates from such
private payors as well.
There are significant private and public sector
pressures to restrain healthcare costs and to restrict reimbursement rates for medical services, and we believe that such pressures will
continue. Many states are continuing to collect less revenue than they did in prior years, and as a result may face ongoing budget shortfalls
and underfunded pension and other liabilities. Deteriorating financial conditions in the states in which we operate could lead to reduced
or delayed funding for Medicaid programs, which may reduce or delay the reimbursement we receive for services provided. Major payors of
healthcare, including federal and state governments and private insurers, have taken steps in recent years to monitor and control costs,
eligibility for and use and delivery of healthcare services, and to revise payment methodologies. As part of their efforts to contain
healthcare costs, purchasers increasingly are demanding discounted or global fee structures or the assumption by healthcare providers
of all or a portion of the financial risk through shared risk, capitation and care management arrangements, often in exchange for exclusive
or preferred participation in their benefit plans. Further, the ability of commercial payors to control healthcare costs may be enhanced
by the increasing consolidation of insurance and managed care companies, which may reduce our ability to negotiate favorable contracts
with such payors.
We expect efforts to impose greater discounts
and more stringent cost controls by government and other payors to continue, thereby reducing the payments we receive for our services.
The effect of cost containment trends will depend, in part, on our payor mix. We cannot assure you that we will be able to offset reduced
operating margins through cost reductions, increased volume, the introduction of additional procedures or otherwise. In addition, we cannot
assure you that future changes to reimbursement rates by government healthcare programs, cost containment measures by private third-party
payors, including fixed fee schedules and capitated payment arrangements, or other factors affecting payments for healthcare services
will not adversely affect our future revenues, operating margins, or profitability.
An increase in uninsured or underinsured
patients or the deterioration in the collectability of the accounts of such patients could harm our results of operations.
Collection of receivables from third-party payors
and patients is critical to our operating performance. Our primary collection risks relate to uninsured patients and the portion of the
bill that is the patient’s responsibility, which primarily includes co-payments and deductibles. We determine the transaction price
based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured
patients and implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies
and historical experience. Implicit price concessions are based on historical collection experience. Significant changes in business office
operations, payor mix, economic conditions or trends in federal and state governmental health coverage could affect our collection of
accounts receivable, cash flow and results of operations. If we experience unexpected increases in the growth of uninsured and underinsured
patients or in bad debt expenses, our results of operations will be harmed.
Failure to timely or accurately bill for
services could have a negative impact on our net revenue, bad debt expense and cash flow.
Billing for healthcare services is an important
but complex aspect of our business. In particular, the current practice of providing physician services in advance of payment or, in some
cases, irrespective of the patient’s ability to pay for such services, may have significant negative impact on our net revenue,
bad debt expense and cash flow. We bill numerous and varied payors, such as bodily injury policies, general liability policies, and personal
injury protection policies, self-pay patients, managed care payors and Medicare and Medicaid. These different payors typically have different
billing requirements that must be satisfied prior to receiving payment for services rendered. Reimbursement is typically conditioned on
our documenting medical necessity, the appropriate level of service and correctly applying diagnosis codes. Incorrect or incomplete documentation
and billing information could result in non-payment for services rendered.
Additional factors that could complicate our ability
to timely or accurately bill payors include:
| · | disputes between payors as to which party is responsible for payment; |
| · | failure of information systems and processes to submit and collect claims in a timely manner; |
| · | variation in coverage for similar services among various payors; |
| · | our reliance on third-parties to provide billing services for certain of our service lines; |
| · | the difficulty of adherence to specific compliance requirements, diagnosis coding and other procedures
mandated by various payors; and |
| · | in connection with billing for physician services, failure to obtain proper physician credentialing and
documentation in order to bill various payors. |
To the extent that the complexity associated with
billing for healthcare services we provide causes delays in our cash collections, we may experience increased carrying costs associated
with the aging of our accounts receivable as well as increased potential for bad debt expense.
Our facilities face competition for patients
from other healthcare providers.
The healthcare industry is highly competitive,
and competition among healthcare providers for patients and physicians has intensified in recent years. In all of the geographical areas
in which we operate, there are other facilities that provide services comparable to those offered by our facilities. Some of our competitors
include facilities that are owned by tax-supported governmental agencies or by nonprofit corporations and may be supported by endowments
and charitable contributions and exempt from property, sales and income taxes. Such exemptions and support are not available to us.
Certain of our competitors may have greater financial
resources, be better equipped and offer a broader range of services than we offer. The number of facilities in the geographic areas in
which we operate has increased significantly. As a result, most of our facilities operate in an increasingly competitive environment.
If our competitors are better able to attract
patients, recruit physicians and other healthcare professionals, expand services or obtain favorable managed care contracts at their facilities,
we may experience a decline in patient volume and our business may be harmed.
Our performance depends on our ability to
recruit and retain quality physicians.
The success and competitive advantage of our facilities
depends, in part, on the number and quality of the physicians on the medical staffs of our facilities, the admitting practices of those
physicians and our maintenance of good relations with those physicians. Physicians generally are not employees of our facilities and may
have admitting privileges at other similar facilities to ours. They may terminate their affiliation with us at any time. If we are unable
to provide high ethical and professional standards, adequate support personnel and technologically advanced equipment and facilities that
meet the needs of those physicians, they may be discouraged from referring patients to our facilities and our results of operations may
decline.
Our performance depends on our ability to
attract and retain qualified nurses and medical support staff and we face competition for staffing that may increase our labor costs and
harm our results of operations.
We depend on the efforts, abilities, and experience
of our medical support personnel, including our nurses, pharmacists and lab technicians and other healthcare professionals. We compete
with other healthcare providers in recruiting and retaining qualified hospital management, nurses and other medical personnel.
The nationwide shortage of nurses and other clinical
staff and support personnel has been a significant operating issue facing us and other healthcare providers. In particular, like others
in the healthcare industry, we continue to experience a shortage of nurses and other clinical staff and support personnel at our facilities
in many geographic areas, which shortage has been exacerbated by the COVID-19 pandemic. In some areas, the increased demand for care is
putting a strain on our resources and staff, which has required us to utilize higher-cost temporary labor and pay premiums above standard
compensation for essential workers. The length and extent of the disruptions caused by the COVID-19 pandemic are currently unknown; however,
we expect such disruptions to continue into 2023 and potentially throughout the duration of the pandemic and beyond. This staffing shortage
may require us to further enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel or require
us to hire expensive temporary personnel. To the extent we cannot maintain sufficient staffing levels at our facilities, we may be required
to limit our services at certain of our facilities which would have a corresponding adverse effect on our net revenues.
We cannot predict the degree to which we will
be affected by the future availability or cost of attracting and retaining talented medical support staff. If our general labor and related
expenses increase, we may not be able to raise our rates correspondingly. Our failure to either recruit and retain qualified management,
nurses and other medical support personnel or control our labor costs could harm our results of operations.
If we do not continually enhance our facilities
with the most recent technological advances in diagnostic and surgical equipment, our ability to maintain and expand our markets will
be adversely affected.
The technology used in medical equipment and related
devices is constantly evolving and, as a result, manufacturers and distributors continue to offer new and upgraded products to healthcare
providers. To compete effectively, we must continually assess our equipment needs and upgrade when significant technological advances
occur. If our facilities do not stay current with technological advances in the healthcare industry, patients may seek treatment from
other providers and/or physicians may refer their patients to alternate sources, which could adversely affect our results of operations
and harm our business.
If we fail to comply with extensive laws
and government regulations, we could suffer civil or criminal penalties or be required to make significant changes to our operations that
could reduce our revenue and profitability.
The healthcare industry is required to comply
with extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things: hospital
billing practices and prices for services; relationships with physicians and other referral sources; adequacy of medical care and quality
of medical equipment and services; ownership of facilities; qualifications of medical and support personnel; confidentiality, maintenance,
privacy and security issues associated with health-related information and patient medical records; certification, licensure and accreditation
of our facilities; operating policies and procedures, and; construction or expansion of facilities and services.
Among these laws are the federal False Claims
Act, HIPAA and the federal anti-kickback statute and the provision of the Social Security Act commonly known as the “Stark Law.”
These laws, and particularly the anti-kickback statute and the Stark Law, impact the relationships that we may have with physicians and
other referral sources. We have a variety of financial relationships with physicians who refer patients to our facilities. The Office
of the Inspector General of the Department of Health and Human Services, or OIG, has enacted safe harbor regulations that outline practices
that are deemed protected from prosecution under the anti-kickback statute. A number of our current arrangements, including financial
relationships with physicians and other referral sources, may not qualify for safe harbor protection under the anti-kickback statute.
Failure to meet a safe harbor does not mean that the arrangement necessarily violates the anti-kickback statute, but may subject the arrangement
to greater scrutiny. We cannot assure that practices that are outside of a safe harbor will not be found to violate the anti-kickback
statute. The Centers for Medicare and Medicaid Services, or CMS, published a Medicare
self-referral disclosure protocol, which is intended to allow providers to self-disclose actual or potential violations of the Stark Law.
Because there are only a few judicial decisions interpreting the Stark Law, there can be no assurance that our facilities will not be
found in violation of the Stark Law or that self-disclosure of a potential violation would result in reduced penalties.
Federal regulations issued under HIPAA contain
provisions that require us to implement and, in the future, may require us to implement additional costly electronic media security systems
and to adopt new business practices designed to protect the privacy and security of each of our patient’s health and related financial
information. Such privacy and security regulations impose extensive administrative, physical and technical requirements on us, restrict
our use and disclosure of certain patient health and financial information, provide patients with rights with respect to their health
information and require us to enter into contracts extending many of the privacy and security regulatory requirements to third parties
that perform duties on our behalf. Additionally, recent changes to HIPAA regulations may result in greater compliance requirements, including
obligations to report breaches of unsecured patient data, as well as create new liabilities for the actions of parties acting as business
associates on our behalf.
These laws and regulations are extremely complex,
and, in many cases, we do not have the benefit of regulatory or judicial interpretation. In the future, it is possible that different
interpretations or enforcement of these laws and regulations could subject our current or past practices to allegations of impropriety
or illegality or could require us to make changes in our facilities, equipment, personnel, services, capital expenditure programs and
operating expenses. A determination that we have violated one or more of these laws, or the public announcement that we are being investigated
for possible violations of one or more of these laws, could have a material adverse effect on our business, financial condition or results
of operations and our business reputation could suffer significantly. In addition, we cannot predict whether other legislation or regulations
at the federal or state level will be adopted, what form such legislation or regulations may take or what their impact on us may be.
If we are deemed to have failed to comply with
the anti-kickback statute, the Stark Law or other applicable laws and regulations, we could be subjected to liabilities, including criminal
penalties, civil penalties (including the loss of our licenses to operate one or more facilities), and exclusion of one or more facilities
from participation in the Medicare, Medicaid and other federal and state healthcare programs. The imposition of such penalties could have
a material adverse effect on our business, financial condition or results of operations.
We are subject to occupational health, safety
and other similar regulations and failure to comply with such regulations could harm our business and results of operations.
We are subject to a wide variety of federal, state
and local occupational health and safety laws and regulations. Regulatory requirements affecting us include, but are not limited to, those
covering: (i) air and water quality control; (ii) occupational health and safety (e.g., standards regarding blood-borne pathogens
and ergonomics, etc.); (iii) waste management; (iv) the handling of asbestos, polychlorinated biphenyls and radioactive substances;
and (v) other hazardous materials. If we fail to comply with those standards, we may be subject to sanctions and penalties that could
harm our business and results of operations.
We may be required to spend substantial
amounts to comply with statutes and regulations relating to privacy and security of protected health information.
There are currently numerous legislative and regulatory
initiatives in the U.S. addressing patient privacy and information security concerns. In particular, federal regulations issued under
HIPAA require our facilities to comply with standards to protect the privacy, security and integrity of protected health information,
or PHI. These requirements include the adoption of certain administrative, physical, and technical safeguards; development of adequate
policies and procedures, training programs and other initiatives to ensure the privacy of PHI is maintained; entry into appropriate agreements
with so-called business associates; and affording patients certain rights with respect to their PHI, including notification of any breaches.
Compliance with these regulations requires substantial expenditures, which could negatively impact our business, financial condition or
results of operations. In addition, our management has spent, and may spend in the future, substantial time and effort on compliance measures.
Violations of the privacy and security regulations
could subject our operations to substantial civil monetary penalties and substantial other costs and penalties associated with a breach
of data security, including criminal penalties. We may also be subject to substantial reputational harm if we experience a substantial
security breach involving PHI.
State efforts to regulate the construction
or expansion of health care facilities could impair our ability to expand.
Many states, including Florida, have enacted certificates
of need, or CON, laws as a condition prior to capital expenditures, construction, expansion, modernization or initiation of major new
services. Failure to obtain necessary state approval can result in our inability to complete an acquisition, expansion or replacement,
the imposition of civil or, in some cases, criminal sanctions, the inability to receive Medicare or Medicaid reimbursement or the revocation
of a facility’s license, which could harm our business. In addition, significant CON reforms have been proposed in a number of states
that would increase the capital spending thresholds and provide exemptions of various services from review requirements. In the past,
we have not experienced any material adverse effects from those requirements, but we cannot predict the impact of these changes upon our
operations.
A cyber security incident could cause a
violation of HIPAA, breach of member privacy, or other negative impacts.
We rely extensively on our information technology,
or IT, systems to manage clinical and financial data, communicate with our patients, payers, vendors and other third parties and summarize
and analyze operating results. In addition, we have made significant investments in technology to adopt and utilize electronic health
records and to become meaningful users of health information technology pursuant to the American Recovery and Reinvestment Act of 2009.
Our IT systems are subject to damage or interruption from power outages, facility damage, computer and telecommunications failures, computer
viruses, security breaches including credit card or personally identifiable information breaches, vandalism, theft, natural disasters,
catastrophic events, human error and potential cyber threats, including malicious codes, worms, phishing attacks, denial of service attacks,
ransomware and other sophisticated cyber-attacks, and our disaster recovery planning cannot account for all eventualities. As cyber criminals
continue to become more sophisticated through evolution of their tactics, techniques and procedures, we have taken, and will continue
to take, additional preventive measures to strengthen the cyber defenses of our networks and data. However, if any of our systems
are damaged, fail to function properly or otherwise become unavailable, we may incur substantial costs to repair or replace them, and
may experience loss or corruption of critical data such as protected health information or other data subject to privacy laws and proprietary
business information and interruptions or disruptions and delays in our ability to perform critical functions, which could materially
and adversely affect our businesses and results of operations and could result in significant penalties or fines, litigation, loss of
customers, significant damage to our reputation and business, and other losses. In addition, our future results of operations, as well
as our reputation, could be adversely impacted by theft, destruction, loss, or misappropriation of public health information, other confidential
data or proprietary business information.
We may fail to deal with clinical waste
in accordance with applicable regulations or otherwise be in breach of relevant medical, health and safety or environmental laws and regulations.
As part of our normal business activities, we
produce and store clinical waste which may produce effects harmful to the environment or human health. The storage and transportation
of such waste is strictly regulated. Our waste disposal services are outsourced and should the relevant service provider fail to comply
with relevant regulations, we could face sanctions or fines which could adversely affect our brand, reputation, business or financial
condition. Health and safety risks are inherent in the services that we provide and are constantly present in our facilities, primarily
in respect of food and water quality, as well as fire safety and the risk that service users may cause harm to themselves, other service
users or employees. From time to time, we have experienced, like other providers of similar services, undesirable health and safety incidents.
Some of our activities are particularly exposed to significant medical risks relating to the transmission of infections or the prescription
and administration of drugs for residents and patients. If any of the above medical or health and safety risks were to materialize, we
may be held liable, fined and any registration certificate could be suspended or withdrawn for failure to comply with applicable regulations,
which may have a material adverse impact on our business, results of operations and financial condition.
If any of our existing healthcare facilities
lose their accreditation or any of our new facilities fail to receive accreditation, such facilities could become ineligible to receive
reimbursement under Medicare or Medicaid.
The construction and operation of healthcare facilities
are subject to extensive federal, state and local regulation relating to, among other things, the adequacy of medical care, equipment,
personnel, operating policies and procedures, fire prevention, rate-setting and compliance with building codes and environmental protection.
Additionally, such facilities are subject to periodic inspection by government authorities to assure their continued compliance with these
various standards.
All of our healthcare facilities are deemed certified,
meaning that they are accredited, properly licensed under the relevant state laws and regulations and certified under the Medicare program.
The effect of maintaining certified facilities is to allow such facilities to participate in the Medicare and Medicaid programs. We believe
that all of our healthcare facilities are in material compliance with applicable federal, state, local and other relevant regulations
and standards. However, should any of our healthcare facilities lose their deemed certified status and thereby lose certification under
the Medicare or Medicaid programs, such facilities would be unable to receive reimbursement from either of those programs and our business
could be materially adversely effected.
We could be subject to lawsuits which could
harm the value of our business, including litigation for which we are not fully reserved.
From time-to-time we are involved in lawsuits,
claims, audits and investigations, including those arising out of services provided, personal injury claims, professional liability claims,
billing and marketing practices, employment disputes and contractual claims. Physicians, hospitals and other participants in healthcare
delivery have become subject to an increasing number of lawsuits alleging medical malpractice and related legal theories such as negligent
hiring, supervision and credentialing. Some of these lawsuits may involve large claim amounts and substantial defense costs.
We generally procure professional liability insurance
coverage for our medical professionals. A substantial portion of our professional liability loss risks are provided by third-party insurers.
Moreover, in the normal course of our business, we are involved in lawsuits, claims, audits and investigations, including those arising
out of our billing and marketing practices, employment disputes, contractual claims and other business disputes for which we may have
no insurance coverage, and which are not subject to actuarial estimates. The outcome of these matters could have a material effect on
our results of operations in the period when we identify the matter, and the ultimate outcome could have a material adverse effect on
our financial position, results of operations, or cash flows.
We may become subject to future lawsuits, claims,
audits and investigations that could result in substantial costs and divert our attention and resources and adversely affect our business
condition. In addition, since our current growth strategy includes acquisitions, among other things, we may become exposed to legal claims
for the activities of an acquired business prior to the acquisition. These lawsuits, claims, audits or investigations, regardless of their
merit or outcome, may also adversely affect our reputation and ability to expand our business.
Risks Related to Our Financial Services (Tax
Resolution) Business
Changes in applicable tax laws have had,
and may in the future have, a negative impact on the demand for and pricing of our services. Government changes in tax filing processes
may adversely affect our business and our consolidated financial position, results of operations, and cash flows.
The U.S. government has in the past made, and
may in the future make, changes to the individual income tax provisions of the Internal Revenue Code, tax regulations, and the rules and
procedures for implementing such laws and regulations. In addition, taxing authorities or other relevant governing bodies in various federal,
state and local jurisdictions in which we operate may change the income tax laws in their respective jurisdictions, and such laws may
vary greatly across the various jurisdictions. It is difficult to predict the manner in which future changes to the Internal Revenue Code,
tax regulations, and the rules and procedures for implementing such laws and regulations, and state, local, and foreign tax laws may impact
us and our industry. Such future changes could decrease the demand or the amount we charge for our services, and, in turn, have a material
adverse effect on our business and our consolidated financial position, results of operations, and cash flows.
In addition, there are various initiatives from
time to time seeking to simplify the tax return preparation filing process. Taxing authorities in various state and local in which we
operate have also introduced measures seeking to simplify or otherwise modify the preparation and filing of tax returns or the issuance
of refunds in their respective jurisdictions. For example, from time to time, U.S. federal and state governments have considered various
proposals through which the respective governmental taxing authorities would use taxpayer information provided by employers, financial
institutions, and other payers to “pre-populate,” prepare and calculate tax returns and distribute them to taxpayers. There
are various initiatives from time to time seeking to expedite, reduce, or change the timing of refunds, which could reduce the demand
for certain of our services.
The adoption or expansion of any measures that
significantly simplify tax return preparation, or otherwise reduce the need for third-party tax return preparation services, including
governmental encroachment at the U.S. federal and state levels, could reduce demand for our tax preparation services and could have a
material adverse effect on our business and our consolidated financial position, results of operations and cash flows.
Increased competition for clients could
adversely affect our current market share and profitability.
We face substantial competition. All categories
in the tax return resolution and preparation industry are highly competitive. In the tax preparation category in particular, there are
a substantial number of tax return preparation firms and accounting firms offering tax return preparation services. Commercial tax return
preparers are highly competitive with regard to price and service. Individual tax filers may elect to change their tax preparation method,
choosing from among various assisted and virtual offerings. Technology advances quickly and in new and unexpected ways, and it is difficult
to predict the manner in which these changes will impact the tax resolution and preparation industry, the problems we may encounter in
enhancing our services or the time and resources we may need to devote to the creation, support, and maintenance of technological enhancements.
If we are slow to enhance our services or technologies, if our competitors are able to achieve results more quickly than us, or if there
are new and unexpected entrants into the industry, we may fail to capture, or lose, a significant share of the market.
Our businesses may be adversely affected
by difficult economic conditions.
Unfavorable changes in economic conditions, which
are typically beyond our control, including without limitation, inflation, slowing growth, rising interest rates, recession, changes in
the political climate, war (including, but not limited to, the conflict between Russia and Ukraine), supply chain or labor market disruptions,
or other adverse changes, could negatively affect our business and financial condition. Difficult economic conditions are frequently characterized
by high unemployment levels and declining consumer and business spending. These poor economic conditions may negatively affect demand
and pricing for our services.
In addition, difficult economic conditions may
disproportionately impact small business owners. Our revenues were negatively impacted during the start of the COVID-19 pandemic and may
again be negatively impacted in the event of a sustained economic slowdown or recession. Difficult economic conditions, including an economic
recession or high inflationary period, could have a material adverse effect on our business and our consolidated financial position, results
of operations, and cash flows.
An interruption in our information systems,
or a third party on which we rely, or an interruption in the internet, could have a material adverse effect on our business and our consolidated
financial position, results of operations, and cash flows.
We and other third parties material to our business
operations rely heavily upon communications, networks, and information systems and the internet to conduct our business (including third-party
internet-based or cloud computing services). These networks, systems, and operations are potentially vulnerable to damage or interruption
from upgrades and maintenance, network failure, hardware failure, software failure, power or telecommunications failures, cyberattacks,
human error, and natural disasters. Any failure or interruption in our information systems, or an interruption in the internet or other
critical business capability during our busiest periods, could negatively impact our business operations and reputation, and increase
our risk of loss.
There can be no assurance that system or internet
failures or interruptions in critical business capabilities will not occur, or, if they do occur, that we will adequately address them.
The precautionary measures that we have implemented to avoid systems outages and to minimize the effects of any data or communication
systems interruptions or failures may not be adequate, and we may not have anticipated or addressed all of the potential events that could
threaten or undermine our information systems or other critical business capabilities. We do not have redundancy for all of our systems
and our disaster recovery planning may not account for all eventualities. If these information systems are unavailable for any reason,
it could negatively impact our ability to deliver our services, which could significantly impact our operations, business, and financial
results.
The occurrence of any systems or internet failure,
or business interruption could negatively impact our ability to serve our clients, which in turn could have a material adverse effect
on our business and our consolidated financial position, results of operations, and cash flows.
Any changes in government regulations or
processes (including the acceptance of tax returns and the issuance of refunds and other amounts to clients by the IRS or state tax agencies)
that affect how we provide services to our clients, or significant problems with such services or the manner in which we provide them
to our clients may harm our revenue, results of operations, and reputation.
Tax laws and tax forms are subject to change each
year, and the nature and timing of such changes are unpredictable. As a part of our business, we must incorporate any changes to tax laws
and tax forms into our tax return preparation offerings. The unpredictable nature, timing and effective dates of changes to tax laws and
tax forms can result in condensed development cycles for our tax return preparation services. From time to time, we review and enhance
our quality controls for preparing accurate tax returns, but there can be no assurance that we will be able to prevent all inaccuracies.
Further, changes in governmental administrations or regulations could result in further and unanticipated changes in requirements or processes,
which may require us to make corresponding changes to our client service systems and procedures. Any major defects or delays caused by
the above-described complexities may lead to loss of clients and loss of or delay in revenue, negative publicity, client dissatisfaction,
a deterioration in our business relationships with our partners, exposure to litigation, and increased operating expenses, even if any
such launch delays or defects are not caused by us. Any of the risks described above could have a material adverse effect on our business,
our reputation, and our consolidated financial position, results of operations, and cash flows.
We may be unable to attract and retain key
personnel.
Our business depends on our ability to attract,
develop, motivate, and retain key personnel in a timely manner. The market for such personnel is extremely competitive, and there can
be no assurance that we will be successful in our efforts to attract and retain the required qualified personnel within necessary timeframes,
or at expected cost levels. As the global labor market continues to evolve as a result of the COVID-19 pandemic and other changes, our
current and prospective key personnel may seek new or different opportunities based on pay levels, benefits, or remote work flexibility
that are different from what we offer, or may determine to leave the workforce, making it difficult to attract and retain them. If we
are unable to attract, develop, motivate, and retain key personnel, our business, operations, and financial results could be negatively
impacted. In addition, if our costs of labor or related costs increase or if new or revised labor laws, rules or regulations are adopted
or implemented that impact our workforce and increase our labor costs, there could be a material adverse effect on our business and our
consolidated financial position, results of operations, and cash flows.
Our business depends on our strong reputation
and the value of our brand.
Developing and maintaining awareness of our brand
is critical to achieving widespread acceptance of our existing and future services and is an important element in attracting new clients.
Adverse publicity (whether or not justified) relating to events or activities involving or attributed to us, our employees, or agents
or our services, which may be enhanced due to the nature of social media, may tarnish our reputation and reduce the value of our brand.
Damage to our reputation may reduce demand for our services and thus have an adverse effect on our future financial results, as well as
require additional resources to rebuild our reputation and restore the value of our brand.
Compliance with the complex and evolving
laws, regulations, standards, and contractual requirements regarding privacy and data protection could require changes in our business
practices and increase costs of operation; failure to comply could result in significant claims, fines, penalties, and damages.
Due to the nature of our business, we collect,
use, and retain large amounts of personal information and data pertaining to clients, including tax return information, financial product
and service information, and social security numbers. In addition, we collect, use, and retain personal information and data of our employees
in the ordinary course of our business.
We are subject to laws, rules, and regulations
relating to the collection, use, disclosure, and security of such consumer and employee personal information, which have drawn increased
attention from U.S. federal, state, and foreign governmental authorities in jurisdictions in which we operate. In the U.S., the IRS generally
requires a tax return preparer to obtain the written consent of the taxpayer prior to using or disclosing the taxpayer’s tax return
information for certain purposes other than tax return preparation, which may limit our ability to market services to our clients. In
addition, other regulations require financial institutions to adopt and disclose their consumer privacy notice and generally provide consumers
with a reasonable opportunity to “opt-out” of having nonpublic personal information disclosed to unaffiliated third parties
for certain purposes.
Numerous jurisdictions have passed, and may in
the future pass, new laws related to the use and retention of consumer or employee information and this area continues to be an area of
interest for U.S. federal, state, and foreign governmental authorities. For example, the State of California adopted the California Consumer
Privacy Act, or the CCPA, which became effective January 1, 2020, as amended by the California Privacy Rights Act, or CPRA, which became
January 1, 2023. Subject to certain exceptions, these laws impose new requirements on how businesses collect, process, manage, and retain
certain personal information of California residents and provide California residents with various rights regarding personal information
collected by a business. Colorado, Connecticut, Utah, and Virginia have adopted comprehensive privacy laws, and other jurisdictions have
adopted or may in the future adopt their own, different privacy laws. These laws may contain different requirements or may be interpreted
and applied inconsistently from jurisdiction to jurisdiction. Our current privacy and data protection policies and practices may not be
consistent with all of those requirements, interpretations, or applications. In addition, changes in U.S. federal and state regulatory
requirements, as well as requirements imposed by governmental authorities in foreign jurisdictions in which we operate, could result in
more stringent requirements and a need to change business practices, including the types of information we can use and the manner in which
we can use such information. Establishing systems and processes, or making changes to our existing policies, to achieve compliance with
these complex and evolving requirements may increase our costs or limit our ability to pursue certain business opportunities. There can
be no assurance that we will successfully comply in all cases, which could result in regulatory investigations, claims, legal actions,
harm to our reputation and brands, fines, penalties, and other damages. We have incurred, and may continue to incur, significant expenses
to comply with existing privacy and data security standards and protocols imposed by law, regulation, industry standards or contractual
obligations.
A security breach of our systems, or third-party
systems on which we rely, resulting in unauthorized access to personal information of our clients or employees or other sensitive, nonpublic
information, may adversely affect the demand for our services, our reputation, and financial performance.
We offer a range of services to our clients, including
back taxes, offer in compromise, audit representation, amending tax returns, tax preparation, tax resolution, wage garnishment relief,
removal of bank levies and liens, bookkeeping, and resolution of other financial challenges. Due to the nature of these services, we use
multiple digital technologies to collect, transmit, and store high volumes of client personal information. We also collect, use, and retain
other sensitive, nonpublic information, such as employee social security numbers, healthcare information, and payroll information, as
well as confidential, nonpublic business information. Certain third parties and vendors have access to personal information to help deliver
client services, or may host certain of our and our clients’ sensitive and personal information and data. Information security risks
continue to increase due in part to the increased adoption of and reliance upon digital technologies by companies and consumers. Our risk
and exposure to these matters remain heightened due to a variety of factors including, among other things, (i) the evolving nature of
these threats and related regulation, (ii) the increased activity and sophistication of hostile foreign governments, organized crime,
cyber criminals, and hackers that may initiate cyberattacks against us or third-party systems on which we rely, (iii) our use of third-party
vendors, and (iv) the usage of remote working arrangements by our associates and third-party vendors, which significantly expanded due
to the COVID-19 pandemic.
Cybersecurity risks may result from fraud or malice
(a cyberattack), human error, or accidental technological failure. Cyberattacks are designed to electronically circumvent network security
for malicious purposes such as unlawfully obtaining personal information, disrupting our ability to offer services, damaging our brand
and reputation, stealing our intellectual property, or advancing social or political agendas. We face a variety of cyberattack threats
including computer viruses, malicious codes, worms, phishing attacks, social engineering, denial of service attacks, ransomware, and other
sophisticated attacks.
Although we use security and business controls
to limit access to and use of personal information and expend significant resources to maintain multiple levels of protection to address
or otherwise mitigate the risk of a security breach, such measures cannot provide absolute security. We regularly test our systems to
discover and address potential vulnerabilities, and we rely on training and testing of our employees regarding heightened phishing and
social engineering threats. We also conduct certain background checks on our employees, as allowed by law. Due to the structure of our
business model, we also rely on other private third parties to maintain secure systems and respond to cybersecurity risks. Where appropriate,
we impose certain requirements and controls on these third parties, but it is possible that they may not appropriately employ these controls
or that such controls (or their own separate requirements and controls) may be insufficient to protect personal information.
Cybersecurity and the continued development and
enhancement of our controls, processes, and practices designed to protect our systems, computers, software, data, and networks from attack,
damage, or unauthorized access remain a priority for us. As risks and regulations continue to evolve, we may be required to expend significant
additional resources to continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities.
Notwithstanding these efforts, there can be no assurance that a security breach, intrusion, or loss or theft of personal information will
not occur. In addition, the techniques used to obtain unauthorized access change frequently, become more sophisticated, and are often
difficult to detect until after a successful attack, causing us to be unable to anticipate these techniques or implement adequate preventive
measures in all cases.
Unauthorized access to personal information as
a result of a security breach could cause us to determine that it is required or advisable for us to notify affected individuals, regulators,
or others under applicable privacy laws and regulations or otherwise. Security breach remediation could also require us to expend significant
resources to assist impacted individuals, repair damaged systems, implement modified information security measures, and maintain client
and business relationships. Other consequences could include reduced client demand for our services, reduced growth and profitability
and negative impacts to future financial results, loss of our ability to deliver one or more services, modifying or stopping existing
business practices, legal actions, harm to our reputation and brand, fines, penalties, and other damages, and further regulation and oversight
by U.S. federal, state, or foreign governmental authorities.
A security breach or other unauthorized access
to our systems could have a material adverse effect on our business and our consolidated financial position, results of operations, and
cash flows.
Laws and regulations or other regulatory
actions could have an adverse effect on our business and our consolidated financial position, results of operations, and cash flows.
Our business and operations are subject to various
forms of government regulation, including U.S. federal requirements regarding the signature and inclusion of identification numbers on
tax returns and tax return retention requirements. U.S. federal laws also subject income tax return preparers to accuracy-related penalties,
and preparers may be prohibited from continuing to act as income tax return preparers if they repeatedly engage in specified misconduct.
We are also subject to, among other things, advertising standards for electronic tax return filers, and to possible monitoring by the
IRS, and if deemed appropriate, the IRS could impose various penalties, including suspension from the IRS electronic filing program. Many
states and local jurisdictions have laws regulating tax professionals, which are in addition to and may be different than federal requirements.
Given the nature of our businesses, we are subject
to various additional federal, state and local laws and regulations, including, without limitation, in the areas of labor, immigration,
marketing and advertising, consumer protection, financial services, privacy and data security, anti-competition, environmental, health
and safety, insurance, and healthcare. There have been significant new or proposed regulations and/or heightened focus by the government
and others in some of these areas, including, for example, related to privacy and data security, consumer financial services, endorsements
and testimonials, telemarketing, restrictive covenants, and labor, including overtime and exemption regulations, state and local laws
on minimum wage, worker classification, and other labor-related issues.
The above requirements and business implications
are subject to change and evolving application, including by means of new legislation, legislative changes, and/or executive orders, and
there may be additional regulatory actions or enforcement priorities, or new interpretations of existing requirements that differ from
ours. These developments could impose unanticipated limitations or require changes to our business, which may make elements of our business
more expensive, less efficient, or impossible to conduct, and may require us to modify our current or future services.
Risks Related to Our Real Estate Business
We are subject to demand fluctuations in
the real estate industry. Any reduction in demand could adversely affect our business, results of operations, and financial condition.
Demand for properties similar to those owned by
us is subject to fluctuations that are often due to factors outside our control. We are not able to predict the course of the real estate
markets or whether the current favorable trends in those markets can, or will, continue. In the event of an economic downturn, our results
of operations may be adversely affected, and we may incur significant impairments and other write-offs and substantial losses from this
business.
Adverse weather conditions, natural disasters,
and other unforeseen and/or unplanned conditions could disrupt our real estate developments.
Adverse weather conditions and natural disasters,
such as hurricanes, tornadoes, earthquakes, floods, droughts, and fires, could have serious impacts on our ability to develop and market
our real estate assets. Properties may also be affected by unforeseen planning, engineering, environmental, or geological conditions or
problems, including conditions or problems which arise on third party properties adjacent to or in the vicinity of properties which own
and which may result in unfavorable impacts on our properties. Any adverse event or circumstance could cause a delay in, prevent the completion
of, or increase the cost of, one or more of our properties expected to be developed and brought to market by us, thereby resulting in
a negative impact on our operations and financial results.
If the market value of our real estate investments
decreases, our results of operations will also likely decrease.
The market value of our real estate assets will
depend on market conditions. If local and/or global economic conditions deteriorate, or if the demand for our properties decreases, we
may not be able to make a profit on such property. As a result of declining economic conditions, we may experience lower than anticipated
profits and/or may not be able to recover our costs of a project when a property is brought to market.
Changes in tax laws, taxes or fees may increase
the cost of development, and such changes could adversely impact our finances and operational results.
Any increase or change in such laws, taxes, or
fees, including real estate property taxes, could increase the cost of development and thus have an adverse effect on our operations.
Such changes could also negatively impact potential and/or actual users and purchasers of our properties because potential buyers may
factor such changes into their decisions to utilize or purchase a property.
The real estate industry is highly competitive
and if other property developers are more successful or offer better value to customers, our business could suffer.
The real estate industry is highly competitive,
regardless of locale. Competitors range from small local companies to large international conglomerates with financial resources much
greater than those of our company. We have to compete for raw materials, construction components, financing, environmental resources,
utilities, infrastructure, labor, skilled management, governmental permits and licensing and other factors critical to the successful
development of our real estate assets. We compete against both new and existing developments and developers. Any increase in or change
to any competitive factor could result in our inability to begin development of our real estate assets in a timely manner and/or increase
costs for the design, development and completion. As a result, we may experience decreased profits due to these factors, impacting our
operations and our overall financial results.
We may incur environmental liabilities with
respect to our real estate assets.
Our properties are subject to a variety of local,
state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. Environmental laws
may result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict development.
Furthermore, under various federal, state, and local laws, ordinances and regulations, an owner of real property may be liable for the
costs or removal or remediation of certain hazardous or toxic substances on or in such property. Such laws often impose such liability
without regard to whether we knew of, or were responsible for, the presence of such hazardous or toxic substances. The cost of any required
remediation and our liability therefor as to our properties are generally not limited under such laws and could exceed the value of the
property and/or the aggregate assets of our company. The presence of such substances, or the failure to properly remediate contamination
from such substances, may adversely affect our ability to sell the real estate or to borrow using such property as collateral.
Our co-venture partners or other partners
in co-ownership arrangements could take actions that decrease the value of our real estate assets.
The development of our real estate assets could
involve joint ventures or other co-ownership arrangements with third parties. Such relationships may involve risks, including, for example:
| · | the possibility that a co-venturer or partner might become bankrupt; |
| · | the possibility that development may require additional capital that we or our partner do not have; |
| · | the possibility that a co-venturer or partner might breach a loan agreement or other agreement or otherwise,
by action or inaction, act in a way detrimental to us; |
| · | that such co-venturer or partner may at any time have economic or business interests or goals that are
or that become inconsistent with the business interests or goals of our company; |
| · | the possibility that we may incur liabilities as the result of the action taken by our partner; |
| · | that such co-venturer or partner may be in a position to take action contrary to our instructions or requests
or contrary to our policies or objectives; or |
| · | that such co-partner may exercise buy/sell rights that force us to or dispose of our share, at a time
and price that may not be consistent with our objectives. |
Any of the above might subject our real estate
assets to liabilities in excess of those contemplated and thus reduce our returns on our investment.
Uninsured losses relating to real property
or excessively expensive premiums for insurance coverage may adversely affect the value of your stock.
The nature of our activities could expose us to
potential liability for personal injuries and, in certain instances, property damage claims. For instance, there are types of losses,
generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, pollution, environmental matters, or extreme
weather conditions such as hurricanes, floods, and snow storms that are uninsurable or not economically insurable, or may be insured subject
to limitations, such as large deductibles or co-payments. We may not carry all the usual and customary insurance policies which would
be carried by a similarly-positioned company, and we may not be carrying those insurance policies in amounts and types sufficient
to cover every risk which may be encountered by our company. Insurance risks associated with potential terrorist acts could sharply increase
the premiums we will pay for coverage against property and casualty claims. We cannot assure you that we will have adequate coverage for
all losses. If any of our properties incur a casualty loss that is not fully covered by insurance, the value of our assets will be reduced
by the amount of any such uninsured loss. In addition, other than the capital reserve or other reserves we may establish, we do not expect
to have any contingent sources of funding in place to repair or reconstruct any uninsured damaged property, and we cannot assure you that
any such sources of funding will be available to us for such purposes in the future. Also, to the extent we must pay unexpectedly large
amounts for insurance, we could suffer reduced earnings that would result in a decreased value attributed to our publicly traded stock.
Risks Related to Ownership of Our Common Stock
Our common stock is eligible for quotation
on the Pink Market, which may have an unfavorable impact on our stock price and liquidity.
Our common stock is eligible for quotation on
the Pink Market operated by OTC Markets Group Inc. The Pink Market is a regulated quotation service that displays real-time quotes, last
sale prices and volume information in over-the-counter securities. The Pink Market is not an issuer listing service, market or exchange.
The requirements for quotation on the Pink Market are considerably lower and less regulated than those of an exchange. Because of this,
it is possible that fewer brokers or dealers will be interested in making a market in our common stock because the market for such securities
is more limited, the stocks are more volatile, and the risk to investors is greater, which may impact the liquidity of our common stock.
Even if an active market begins to develop in our common stock, the quotation of our common stock on the Pink Market may result in a less
liquid market available for existing and potential stockholders to trade common stock, could depress the trading price of our common stock
and could have a long-term adverse impact on our ability to raise capital in the future. If an active market is never developed for our
common stock, it will be difficult or impossible for you to sell any common stock you purchase.
Our common stock may be subject to significant
price volatility which may have an adverse effect on your ability to liquidate your investment in our common stock.
The market for our common stock may be characterized
by significant price volatility when compared to seasoned issuers, and we expect that our stock price will be more volatile than a seasoned
issuer for the indefinite future. The potential volatility in our stock price is attributable to a number of factors. First, our common
stock may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities
of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our common
stock could, for example, decline precipitously if a large number of our shares of common stock are sold on the market without commensurate
demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its stock price. Secondly, an
investment in us is a speculative or “risky” investment due to our lack of meaningful profits to date and uncertainty of future
profits. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment
in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts
than would be the case with the stock of a seasoned issuer.
Our officers and directors own a significant
percentage of our outstanding voting securities which could reduce the ability of minority stockholders to effect certain corporate actions.
Our executive officers and directors are collectively
able to exercise approximately 84.53% of our total voting power. As a result, they possess significant influence and can elect a majority
of our board of directors and authorize or prevent proposed significant corporate transactions without the votes of any other stockholders.
They are expected to have significant influence over a decision to enter into any corporate transaction and have the ability to prevent
any transaction that requires the approval of stockholders, regardless of whether or not our other stockholders believe that such transaction
is in our best interests. Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control
or other business combination, which could, in turn, have an adverse effect on the market price of our common stock or prevent our stockholder
from realizing a premium over the then-prevailing market price for their common stock.
We have no current plans to pay cash dividends
on our common stock for the foreseeable future, and you may not receive any return on investment unless you sell your common stock for
a price greater than that which you paid for it.
We may retain future earnings, if any, for future
operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision
to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things,
our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our board of directors
may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness
we or our subsidiaries incur. As a result, you may not receive any return on an investment in our common stock unless you sell our common
stock for a price greater than that which you paid for it and any potential investor who anticipates the need for current dividends should
not purchase our securities.
Future issuances of our common stock or
securities convertible into, or exercisable or exchangeable for, our common stock could cause the market price of our common stock to
decline and would result in the dilution of your holdings.
Future issuances of our common stock or securities
convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance
of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot
predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our
common stock. In all events, future issuances of our common stock would result in the dilution of your holdings. In addition, the perception
that new issuances of our securities could occur could adversely affect the market price of our common stock.
Rule 144 sales in the future may have a
depressive effect on our stock price.
All of the outstanding common stock held by the
present officers, directors, and affiliate stockholders are “restricted securities” within the meaning of Rule 144 under the
Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements
of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities
laws. Rule 144 provides in essence that a person who is an affiliate or officer or director who has held restricted securities for six
months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the
greater of 1.0% of a company’s outstanding common shares. There is no limitation on the amount of restricted securities that may
be sold by a non-affiliate after the owner has held the restricted securities for a period of six months if our company is a current,
reporting company under the Exchange Act. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or
pursuant to subsequent registration of common stock of present stockholders, may have a depressive effect upon the price of our common
stock in any market that may develop.
Future issuances of debt securities, which
would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior
to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able
to achieve from an investment in our common stock.
In the future, we may attempt to increase our
capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect
to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders
of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over
holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue
debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors
beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of
our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return,
if any, they may be able to achieve from an investment in our common stock.
If our common stocks become subject to the
penny stock rules, it would become more difficult to trade our common stock.
The SEC has adopted rules that regulate broker-dealer
practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00,
other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems,
provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system.
If we do not obtain a listing on a national securities exchange and if the price of our common stock is less than $5.00, our common stock
could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt
from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules
require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special
written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment
of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and
dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the
secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.
If securities industry analysts do not publish
research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could
be negatively affected.
Any trading market for our common stock may be
influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never
obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price
and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of
such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market
trading volume of our common stock could be negatively affected.
We are subject to ongoing public reporting
requirements that are less rigorous than for larger, more established companies, which could make our securities less attractive to investors
and may make it more difficult to compare our performance with other public companies.
We are a “smaller reporting company”
within the meaning of the Exchange Act. Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer
that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting
company and that had (i) a public float of less than $250 million or (ii) annual revenues of less than $100 million and either had no
public float or a public float of less than $700 million.
As a smaller reporting company, we will not be
required and may not include a compensation discussion and analysis section in our proxy statements and we will provide only two years
of financial statements. We also will have other “scaled” disclosure requirements that are less comprehensive than issuers
that are not smaller reporting companies.
Because we will be subject to ongoing public reporting
requirements that are less rigorous than Exchange Act rules for companies that are not smaller reporting companies, our stockholders could
receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find
our common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less
active trading or more volatility in the price of our common stock.
Anti-takeover provisions in our charter
documents and under Nevada law could make an acquisition of our company more difficult, and limit attempts by our stockholders to replace
or remove our current management.
Provisions in our articles of incorporation and
bylaws may have the effect of delaying or preventing a change of control of our company or changes in our management. As described above,
our executive officers and directors are collectively able to exercise a significant portion of our voting power. Furthermore, neither
the holders of our common stock nor the holders of our preferred stock have cumulative voting rights in the election of our directors.
The combination of the present ownership by our management of a significant portion of our issued and outstanding voting power and lack
of cumulative voting makes it more difficult for other stockholders to replace our board of directors or for a third party to obtain control
of our company by replacing its board of directors.
In addition, our authorized but unissued shares
of common stock are available for our board of directors to issue without stockholder approval, subject to Nasdaq’s rules. We may
use these additional shares for a variety of corporate purposes, including raising additional capital, corporate acquisitions and employee
stock plans. The existence of our authorized but unissued shares of common stock could render it more difficult or discourage an attempt
to obtain control of our company by means of a proxy context, tender offer, merger or other transaction since our board of directors can
issue large amounts of capital stock as part of a defense to a take-over challenge. In addition, we have authorized in our articles of
incorporation 1,000,000,000 shares of preferred stock. Our board acting alone and without approval of our stockholders, subject to Nasdaq’s
rules, can designate and issue one or more series of preferred stock containing super-voting provisions, enhanced economic rights, rights
to elect directors, or other dilutive features, that could be utilized as part of a defense to a take-over challenge.
In addition, various provisions of our bylaws
may also have an anti-takeover effect. These provisions may delay, defer or prevent a tender offer or takeover attempt of our company
that a stockholder might consider in his or her best interest, including attempts that might result in a premium over the market price
for the shares held by our stockholders. Our bylaws may be adopted, amended or repealed only by our board of directors. Our bylaws also
contain limitations as to who may call special meetings as well as require advance notice of stockholder matters to be brought at a meeting.
Additionally, our bylaws also provide that no director may be removed by less than a two-thirds vote of the issued and outstanding shares
entitled to vote on the removal. Our bylaws also permit the board of directors to establish the number of directors and fill any vacancies
and newly created directorships. These provisions will prevent a stockholder from increasing the size of our board of directors and gaining
control of our board of directors by filling the resulting vacancies with its own nominees.
Our bylaws also establish an advance notice procedure
for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election
to the board of directors. Stockholders at an annual meeting will only be able to consider proposals or nominations specified in the notice
of meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder who was a stockholder of
record on the record date for the meeting, who is entitled to vote at the meeting and who has given us timely written notice, in proper
form, of the stockholder’s intention to bring that business before the meeting. Although our bylaws do not give the board of directors
the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special
or annual meeting, our bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures
are not followed or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors
or otherwise attempting to obtain control of our company.
These provisions may frustrate or prevent any
attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members
of our board of directors, which is responsible for appointing the members of our management.