10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020

Commission file number: 333-206839

HEALTH-RIGHT DISCOVERIES, INC. 

(Exact name of registrant as specified in its charter)

Florida	45-3588650
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

18851 NE 29th Avenue, Suite 700, Aventura, Florida 33180 

(Address of Principal Executive Offices)

(305) 705-3247 

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-accelerated Filer ☐	Smaller reporting company ☒
	Emerging growth company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 

The number of shares outstanding of the registrant’s common stock, $0.001 par value, as of November 17, 2020 was 22,869,191 shares.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.	1
	Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (unaudited)	1
	Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)	2
	Consolidated Statements of Stockholders’ Deficiency for the three and nine months ended September 30, 2020 and 2019 (unaudited)	3
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	20
Item 3.	Quantitative Disclosures About Market Risk.	25
Item 4.	Controls and Procedures.	25
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	26
Item 1A.	Risk Factors.	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	26
Item 4.	Mine Safety Disclosures.	26
Item 5.	Other information.	26
Item 6.	Exhibits.	26
SIGNATURES		26

i 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

HEALTH-RIGHT DISCOVERIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2020			December 31, 2019
ASSETS
CURRENT ASSETS:
Cash	$	1,769,460		$	2,242,013
Accounts receivable, net		66,858			52,281
Inventories		31,042			10,735
Prepaid and other assets		3,530			14,433
Total Current Assets		1,870,890			2,319,462
Property and equipment, net		20,129			23,871
Deferred tax asset		89,171			—
Right of use asset		—			25,001
Intangible assets, net		1,955,887			2,230,122
Goodwill		3,313,226			3,313,226
TOTAL ASSETS	$	7,249,303		$	7,911,682
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	1,572,324		$	1,388,505
Current portion of right of use liability		—			8,040
Current portion - notes payable - PPP loans		71,936			—
Current portion - notes payable		2,500,000			2,500,000
Current portion - notes payable,  net of discounts of $-0- and $123,336 as of September 30, 2020 and December 31, 2019, respectively		5,834,508			5,181,164
Total Current Liabilities		9,978,768			9,077,709
LONG-TERM LIABILITIES:
Right of use liability, net of current portion		—			16,784
Notes payable - PPP loans, net of current portion		45,777			—
Deferred tax liability		—			364,882
Total Long-term Liabilities		45,777			381,666
Total Liabilities	$	10,024,545		$	9,459,375
STOCKHOLDERS’ DEFICIENCY
Preferred Stock, .001 par value, 5,000,000 shares authorized No shares issued and outstanding September 30, 2020 and December 31, 2019, respectively		—			—
Common Stock, .001 par value, 100,000,000 shares authorized 22,869,191 shares issued and outstanding September 30, 2020 and December 31, 2019, respectively		22,869			22,869
Additional Paid in Capital		1,117,967			1,117,967
Accumulated Deficit		(3,916,078	)		(2,688,529	)
Total Stockholders’ Deficiency		(2,775,242	)		(1,547,693	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY	$	7,249,303		$	7,911,682

See accompanying notes to unaudited consolidated financial statements.

1

HEALTH-RIGHT DISCOVERIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	FOR THE THREE MONTHS ENDED						FOR THE NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
	2020			2019			2020			2019
Revenue	$	343,492		$	828,302		$	1,099,213		$	2,789,562
Cost of Revenue		64,547			127,661			174,458			431,102
Gross Profit		278,945			700,641			924,755			2,358,460
Operating Expenses
General and administrative		321,308			479,650			1,016,408			1,595,710
Amortization and depreciation		95,556			121,100			286,706			363,356
Impairment loss		—			1,061,200			—			1,061,200
Total operating expenses		416,864			1,661,950			1,303,114			3,020,266
Loss from operations		(137,919	)		(961,309	)		(378,359	)		(661,806	)
Other Expenses
Interest expenses		434,299			352,419			1,303,243			1,048,710
Total other expenses		434,299			352,419			1,303,243			1,048,710
Loss before income tax benefit		(572,218	)		(1,313,728	)		(1,681,602	)		(1,710,516	)
Income tax benefit		154,519			354,707			454,053			461,840
NET LOSS	$	(417,699	)	$	(959,021	)	$	(1,227,549	)	$	(1,248,676	)
Loss per common share		(0.02	)		(0.04	)		(0.05	)		(0.05	)
Weighted average common shares outstanding -  basic and diluted		22,869,191			22,869,191			22,869,191			22,869,191

See accompanying notes to unaudited consolidated financial statements.

2

HEALTH-RIGHT DISCOVERIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Unaudited)

					Additional
	------COMMON STOCK------				Paid-In		Accumulated
	Shares		Amount		Capital		Deficit			Total
BALANCE – December 31, 2019		22,869,191	$	22,869	$	1,117,967	$	(2,688,529	)	$	(1,547,693	)
Net loss for the three months ended March 31, 2020		—		—		—		(410,963	)		(410,963	)
BALANCE – March 31, 2020		22,869,191		22,869		1,117,967		(3,099,492	)		(1,958,656	)
Net loss for the three months ended June 30, 2020		—		—		—		(398,887	)		(398,887	)
BALANCE – June 30, 2020		22,869,191		22,869		1,117,967		(3,498,379	)		(2,357,543	)
Net loss for the three months ended September 30, 2020		—		—		—		(417,699	)		(417,699	)
BALANCE – September 30, 2020		22,869,191	$	22,869	$	1,117,967	$	(3,916,078	)	$	(2,775,242	)
BALANCE – December 31, 2018		22,869,191	$	22,869	$	1,117,967	$	(1,209,611	)	$	(68,775	)
Adoption of ASU 2016-02		—		—		—		(18,254	)		(18,254	)
Net loss for the three months ended March 31, 2019		—		—		—		(32,167	)		(32,167	)
BALANCE – March 31, 2019		22,869,191		22,869		1,117,967		(1,260,032	)		(119,196	)
Net loss for the three months ended June 30, 2019		—		—		—		(257,488	)		(257,488	)
BALANCE – June 30, 2019		22,869,191		22,869		1,117,967		(1,517,520	)		(376,684	)
Net loss for the three months ended September 30, 2019		—		—		—		(959,021	)		(959,021	)
BALANCE – September 30, 2019		22,869,191	$	22,869	$	1,117,967	$	(2,476,541	)	$	(1,335,705	)

See accompanying notes to unaudited consolidated financial statements.

3

HEALTH-RIGHT DISCOVERIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Unaudited)

	2020			2019
OPERATING ACTIVITIES:
Net loss	$	(1,227,549	)	$	(1,248,676	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense		3,742			5,776
Amortization expense		274,235			348,850
Impairment loss		—			1,061,200
Right of use liability amortization		177			(2,323	)
Non-cash interest		123,336			123,337
Deferred income tax benefit		(454,053	)		(461,840	)
Changes in operating assets and liabilities:
Accounts receivable		(14,577	)		78,671
Inventories		(20,307	)		11,211
Prepaid and other assets		10,903			(15,609	)
Accounts payable and accrued expenses		713,827			539,663
Accrued salary to related party		—			(50,000	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(590,266	)		390,260
FINANCING ACTIVITIES:
Proceeds of notes payable		117,713			—
NET CASH PROVIDED BY FINANCING ACTIVITIES		117,713			—
(DECREASE) INCREASE IN CASH		(472,553	)		390,260
CASH - BEGINNING OF PERIOD		2,242,013			2,149,738
CASH - END OF PERIOD	$	1,769,460		$	2,539,998
Noncash investing and financing activities:
Accrued interest converted to note payable	$	530,008		$	154,500
Supplemental disclosures of cash flow information:
Cash paid for interest	$	516,636		$	499,765
Cash paid for income taxes	$	—		$	80,000

See accompanying notes to unaudited consolidated financial statements.

4

HEALTH-RIGHT DISCOVERIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – Summary of Significant Accounting Policies

Health-Right Discoveries, Inc. (“the Company”) was formed under the laws of the State of Florida on October 12, 2011 under the name Four Plex Partners, Inc. and subsequently changed its name to Health-Right Discoveries, Inc. on March 22, 2012. The Company’s primary business was to develop and market an innovative portfolio of both prescription nutritional, OTC monograph and natural products that primarily focus on factors relating to stress-induced conditions and diseases.

On September 29, 2017, pursuant to a Securities Purchase Agreement dated August 17, 2017, the Company acquired (the “Acquisition”) all the outstanding shares of Common Compounds, Inc., n/k/a CCI Billing, Inc. d/b/a Complete Claim Management (“CCI”) and EZPharmaRx, LLC n/k/a Script Connection, LLC (“SCLLC”). HRD, through its subsidiaries, CCI and SCLLC, along with licensed pharmaceutical wholesalers, offer and provide their respective services to physician practices that desire to prescribe and dispense certain pharmaceutical products and medications in the practice’s office to patients receiving treatment for work-related injuries (“In-Office Dispensing Program”).

CCI offers and provides administrative services and billing services to physician practices (each a “Practice” and collectively, the “Practices”) desiring to make certain over-the-counter products, including non-narcotic topical medications, (“OTC Products”), and certain prescription medications (“Prescription Medications”) available to patients in the physician practice’s office. Each participating Practice is responsible for obtaining and maintaining any necessary and appropriate licenses, permits, or other documentation required to order, receive, store, and dispense OTC Products or certain Prescription Medications in the Practice’s office in accordance with applicable federal and state law. Such services include, but are not limited to, assisting Practices with insurance claim processing, prior authorization, billing and collections, and recordkeeping. CCI offers its fee-based services to Practices participating in the In-Office Dispensing Program. CCI also provides billing and collection services on behalf of SCLLC in connection with SCLLC’s sales and distribution of OTC Products to Practices participating in the OTC Program.

SCLLC offers OTC Products to Practices that desire to make such products available to patients in the Practice’s office through participation in the OTC Program. SCLLC is not a compounding pharmacy, and neither CCI nor SCLLC is involved in creating topicals with compounding pharmacies.

SCLLC also assists the Practices in ordering Prescription Medications directly from licensed pharmaceutical wholesalers and oversees the sale and distribution of Prescription Medications to the Practices. SCLLC does not sell any Prescription Medications to Practices and does not profit from the sale of such medications.

The significant accounting policies of the Company were described in Note 2 to the audited consolidated financial statements included in the Company’s 2019 Annual Report on Form 10-K. There have been no significant changes in the Company’s significant accounting policies for the nine months ended September 30, 2020.

Basis of Presentation

Principles of Consolidation 

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All intercompany accounts and transactions have been eliminated.

The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission.  Therefore, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statement and notes thereto included in the 2019 Form 10-K for the year ended December 31, 2019. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. Certain prior period amounts have been reclassified to conform to the current presentation. 

5

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates.

Cash and cash equivalents

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its principal cash balances in various financial institutions. These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2020 and December 31, 2019, $1,180,322 and $1,289,897 were in excess of the FDIC insured limit, respectively.

Accounts Receivable 

Accounts receivable are stated at the amount the Company expects to collect from customers. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management has recorded an allowance for doubtful accounts in the amounts of $4,660 and $5,040 at September 30, 2020 and December 31, 2019 respectively. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of the Company’s customers was to deteriorate and adversely affecting their ability to make payments, additional allowances would be required.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU and all subsequently issued clarifying ASUs replaced most existing revenue recognition guidance in U.S. GAAP. The ASU also required expanded disclosures relating to the nature amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new standard effective January 1, 2018, the first day of the Company’s fiscal year. For these reasons, the adoption of this ASU did not have a significant impact on the Company’s financial statements.

Effective January 1, 2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers. The revenue recognition policies as enumerated below reflect the Company’s accounting policies effective January 1, 2018, which did not have a materially different financial statement result than what the results would have been under the previous accounting policies for revenue recognition.

6

CCI’s revenue results from the consulting services agreements, which included providing services to physicians for billing insurance companies. The Company has determined the performance obligations in these consulting service agreements relate to the satisfaction of billing the insurance company on behalf of the physicians. CCI remits billings to insurance companies on behalf of the physicians, collect the proceeds and remits an agreed upon percentage amount to the physician. The amounts reported as revenue are recorded net of amounts remitted. The Company follows Staff Accounting Bulletin (“SAB”) No. 104, which states that the revenue is not earned until the company has been paid by the insurance company at which time it becomes realized or realizable.

SCLLC’s revenue from the sale of products are recognized when the sale is consummated, and title is transferred. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in the sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. As such, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606.

The following tables disaggregate revenue by major source for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, 2020	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	92,546	$	—	$	92,546
Consulting Services		250,946		—		—		250,946
Total Revenue	$	250,946	$	93,087	$	—	$	343,492

Three Months Ended September 30, 2019	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	169,332	$	—	$	169,332
Consulting Services		658,970		—		—		658,970
Total Revenue	$	658,970	$	169,332	$	—	$	828,302

Nine Months Ended September 30, 2020	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	254,569	$	—	$	254,569
Consulting Services		844,644		—		—		844,644
Total Revenue	$	844,644	$	254,569	$	—	$	1,099,213

Nine Months Ended September 30, 2019	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	585,148	$	—	$	585,148
Consulting Services		2,204,414		—		—		2,204,414
Total Revenue	$	2,204,414	$	585,148	$	—	$	2,789,562

(1) The Company’s corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription.

7

Inventories

Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, or net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their net realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations. Based on management’s estimate, there was no obsolete inventory at September 30, 2020 and December 31, 2019.

Property and Equipment

Property and equipment are stated at cost. Expenditures for additions are capitalized, repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows:

	September 30, 2020			December 31, 2019
Machinery and equipment – 7 years	$	44,497		$	44,497
Accumulated depreciation		(24,368	)		(20,626	)
Total property and equipment	$	20,129		$	23,871

Intangible Assets

Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization, unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined.

Intangible assets are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified.

The Company calculates fair value of our intangible assets as the present value of estimated future cash flows the Company expects to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, The Company uses estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group).

During the third quarter 2019, the Company reviewed its customer lists and impaired approximately 50% of its value, or $1,061,200.

Goodwill

Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles—Goodwill and Other,” goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired.

8

In January 2017, the FASB issued ASU 2017-04 that eliminates “step 2” from the goodwill impairment test. The Company made the election to early adopt ASU 2017-04 as of January 1, 2018 and the standard was applied on a prospective basis, as required. In accordance with ASC 350-25-35-3, “An entity may first assess qualitative factors, as described in paragraphs 350-20-35-3A through 35-3G, to determine whether it is necessary to perform the quantitative goodwill impairment test.” Management reviewed the following qualitative factors around its goodwill and believes that the fair value of its investment in the Company exceeds its carrying amount at September 30, 2020 and December 31, 2019. 

The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of December 31 and whenever events or changes in circumstances indicate carrying amount may not be recoverable.

When assessing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a two-step impairment test. If the Company concludes otherwise, then no further action is taken. The Company also has the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit.

In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.

The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit.

If the carrying amount of a reporting unit is in excess of its fair value, an impairment may exist, and the Company must perform the second step of the impairment analysis to measure the amount of the impairment loss, by allocating the reporting unit’s fair value to its assets and liabilities other than goodwill, comparing the carrying amount of the goodwill to the resulting implied fair value of the goodwill, and recording an impairment charge for any excess.

9

Stock-based compensation

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the fair value of the award is calculated on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for common shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, the fair value of the award on the date of grant is calculated in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

Income Taxes

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding, noted above.

Accounting for Business Combinations

In accordance with ASC Topic 805, “Business Combinations,” when accounting for business combinations we are required to recognize the assets acquired, liabilities assumed, contractual contingencies, non-controlling interests and contingent consideration at their fair value as of the acquisition date. These items are recorded on our unaudited consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of acquired businesses are included in the unaudited consolidated statements of operations since their respective acquisition dates.

The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets, estimated contingent consideration payments and/or pre-acquisition contingencies, all of which ultimately affect the fair value of goodwill established as of the acquisition date. Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date and is then subsequently tested for impairment at least annually. If the fair value of the net assets acquired exceeds the purchase price consideration, we record a gain on bargain purchase. However, in such a case, before the measurement period closes we perform a reassessment to reconfirm whether we have correctly identified all of the assets acquired and all of the liabilities assumed as of the acquisition date.

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As part of our accounting for business combinations we are required to estimate the useful lives of identifiable intangible assets recognized separately from goodwill. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the acquired business. An intangible asset with a finite useful life shall be amortized; an intangible asset with an indefinite useful life shall not be amortized. We base the estimate of the useful life of an intangible asset on an analysis of all pertinent factors, in particular, all of the following factors with no one factor being more presumptive than the other:

● The expected use of the asset.

● The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate.

● Any legal, regulatory, or contractual provisions that may limit the useful life.

● Our own historical experience in renewing or extending similar arrangements, consistent with our intended use of the asset, regardless of whether those arrangements have explicit renewal or extension provisions.

● The effects of obsolescence, demand, competition, and other economic factors.

● The level of maintenance expenditures required to obtain the expected future cash flows from the asset.

If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset shall be considered to be indefinite. The term indefinite does not mean the same as infinite or indeterminate. The useful life of an intangible asset is indefinite if that life extends beyond the foreseeable horizon—that is, there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the acquired business.

Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired entity and are inherently uncertain. Examples of critical estimates in accounting for acquisitions include but are not limited to:

● future expected cash flows from sales of products and services and related contracts and agreements;

● discount and long-term growth rates; and

● the estimated fair value of the acquisition-related contingent consideration, which is performed using a probability-weighted income approach based upon the forecasted achievement of post-acquisition pre-determined targets;

NOTE 2 – Going Concern

The accompanying unaudited financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has been incurring losses and with the ongoing COVID-19 outbreak, finds an ongoing lack of revenues sufficient to cover its operating costs and is dependent on refinancing debt, which matured on September 29, 2020 to fund its operations (see Note 13). Management of the Company is making efforts to refinance its debts with its lender. Management of the Company believes, there can be no assurance that the Company will be able to raise additional equity capital or be successful in increasing revenues enough to sustain its operating expenses. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying unaudited financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

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The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES act was enacted as a response to the COVID-19 outbreak discussed above and is meant to provide companies with economic relief.  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.  

NOTE 3 – Leases

Adoption of ASC Topic 842, Leases

On January 1, 2019, the Company adopted ASC 842, Leases, using a modified retrospective method applied to all contracts as of January 1, 2019. Therefore, for reporting periods beginning after December 31, 2018, the financial statements are prepared in accordance with the current lease standard and the financial statements for all periods prior to January 1, 2019 are presented under the previous lease standard (“ASC 840”).

The Company determines if an arrangement is a lease, or contains a lease, when a contract is signed. The Company determines if a lease is an operating or financing lease and records a lease asset and a lease liability upon lease commencement.

The Company had operating leases for office space in Arkansas and South Carolina. The Company has no finance leases as of September 30, 2020. For office space, the Company has elected to combine the fixed payments to lease the asset and any fixed non-lease payments (such as maintenance or utility charges) when calculating the lease asset and lease liability. On July 29, 2019, the Company terminated its Arkansas lease effect October 31, 2019 in accordance with Section 8 of their First Amendment. On October 6, 2019, the Company entered into a new one year lease in Arkansas beginning on November 1, 2019 with monthly rent in the amount of $1,210 per month. As of October 1, 2020, the Company renewed the lease (See Note 13). The Company has a lease in Florida with a monthly rent of $80.

On July 28, 2020, the Company entered into a lease termination with Ana maid, LLC, the October 30, 2018 lease was terminated effective July 31, 2020, for a payment of $4,650 and the deposit. As a result, the Company closed its South Carolina office.

The Company recognizes lease expense on a straight-line basis over the lease term. Certain of our lease agreements include rent payments which are adjusted periodically for inflation. Any change in payments due to changes in inflation rates are recognized as variable lease expense as they are incurred. Variable lease expense also includes costs for property taxes, insurance and services provided by the lessor which are charged based on usage or performance.

Some leases have one or more options to renew, with renewal terms that can initially extend the lease term for various periods up to 2 years. The exercise of renewal options for office space and data centers is at the Company’s discretion and are included if they are reasonably certain to be exercised.

When the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as its discount rate to determine the present value of its lease payments. The incremental borrowing rates approximate the rate the Company would pay to borrow in the currency of the lease payments on a collateralized basis for the weighted-average life of the lease.

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 The Company recognized the following related to leases in its Unaudited Consolidated Balance Sheets at September 30, 2020 and December 31, 2019.

Leases	Classification in Consolidated Balance Sheets	September 30, 2020		December 31, 2019
Operating lease assets	Right of use asset	$	—	$	25,001
Lease Liabilities:
Current operating lease liabilities	Right of use liability	$	—	$	8,040
Long-term operating lease liabilities	Right of use liability		—		16,784
Total operating lease liabilities		$	—	$	24,824

The Company recognized the following related to operating leases in its Unaudited Consolidated Statements of Operations for three and nine months ended September 30, 2020 and 2019:

		Three Months		Nine Months
	Classification in Unaudited	Ended September		Ended September
Leases	Consolidated Statements of Operations	30, 2020		30, 2020
Lease expense	General and administrative and Information technology	$	—	$	4,744
Total lease expense		$	—	$	4,744

		Three Months		Nine Months
	Classification in Unaudited	Ended September		Ended September
Leases	Consolidated Statements of Operations	30, 2019		30, 2019
Lease expense	General and administrative and Information technology	$	15,522	$	46,566
Total lease expense		$	15,522	$	46,566

13

Supplemental cash flow information related to operating leases for the three and nine months as of September 30, 2020 and 2019 are as follows: 

	Three Months		Nine Months
	Ended September 30,		Ended September 30,
Leases	2020		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	—	$	4,744
Right-of-use assets obtained in exchange for lease obligations:
Operating Leases	$	—	$	—

	Three Months		Nine Months
	Ended September 30,		Ended September 30,
Leases	2019		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	15,522	$	46,566
Right-of-use assets obtained in exchange for lease obligations:
Operating Leases	$	—	$	—

“Operating lease amortization” presented in the operating activities section of the Unaudited Consolidated Statement of Cash Flows reflects the portion of the operating lease expense that amortized the operating lease asset.

NOTE 4 – Intangible Assets

Amortizing Intangible Assets	Estimates Useful Life	Gross Carrying Amount September 30, 2020			Gross Carrying Amount December 31, 2019
Customer Lists	8 years	$	1,326,500		$	1,326,500
Tradenames	15 years		377,000			377,000
IP Technologies	10 years		819,000			819,000
Non-compete	5 years		464,000			464,000
			2,986,500			2,986,500
Less: Accumulated Amortization			(1,030,613	)		(756,378	)
		$	1,955,887		$	2,230,122

The amortization expense related to the intangible assets was $91,412 and $274,235 for the three and nine months ended September 30, 2020 and $116,283 and $348,850 for the three and nine months ended September 30, 2019. During the third quarter 2019, the Company reviewed its customer lists and impaired approximately 50% of its value, or $1,061,200.

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The valuation of the assets acquired and liabilities assumed in connection with this acquisition was based on fair values at the acquisition date. The assets purchased and liabilities assumed for these acquisitions have been reflected in the accompanying consolidated balance sheets.

NOTE 5 – Notes payable

The Company obtained a secured convertible note with a lender for $5 million, interest was payable monthly, at 12.75% per annum, the note matured on September 29, 2020 (see Note 13). The note can be converted at any time in whole or in part at $0.44 per share. In addition, the lender received 3,584,279 shares of common stock valued at $0.10 per share along with a 2% original issue discount. The total amount of the discount is $493,345. The Company had incurred $34,917 in loan costs. Both the discount and loan costs were presented as a discount to the note payable. The Company recorded $477,405 and $154,500 of payment-in-kind interest which was added to the note as of September 30, 2020 and December 31, 2019, respectively. The note is collateralized by substantially all the assets of the Company. During November 2020, the Company renegotiated its note (see Note 13).

The Company, as part of consideration for the purchase of CCI and SCLLC, issued a $2.5 million promissory note to the seller. The note is non-interest bearing with five annual payments of $500,000 (subject to adjustment to $377,400 if the business of CCI and SCLLC does not meet certain financial targets in 2017 and 2018) and matures on September 30, 2022. Interest has been imputed at 12.75% per annum. The note is in default as of September 30, 2018 due to the Company not making the required principal payment (see Note 11).

The Company has expensed default interest (17% per annum) in the amounts of $107,123 and $319,041 as of three and nine months September 30, 2020 and 2019, respectively. Upon each annual payment date (each, a “Due Date”), the holder may elect to convert the annual installment of the principal amount due into shares of common stock at a conversion price equal to 50% of “fair market value,” which is defined as the average closing price for the shares on the principal market on which they are traded during the thirty (30) trading days prior to the applicable Due Date, provided, further, that (a) the conversion price shall not be lower than $2.00 per share, subject to adjustment for stock splits, stock dividends and similar recapitalization events; and (b) in the event such conversion price as so adjusted is lower than $2.00 per share, the installment payable upon such Due Date may not be converted into shares without written agreement between the Company and the seller. 

On April 17, 2020, the Company obtained two Notes under the Paycheck Protection Program (PPP) in the amount of $57,965 and $59,748 with Iberia Bank. The interest rates on these Notes will be at a fixed rate of 1%, per annum, however no interest will be due during the first six months after the loan was disbursed. After the six-month deferral period and taking into account any loan forgiveness as approved by the SBA, the remaining principal and accrued interest will be payable monthly. The Notes will mature on April 17, 2022.

	September 30, 2020		December 31, 2019
Note payable – monthly interest, 12.75% per annum, matured on September 29, 2020 (see Note 13)	$	5,834,508	$	5,304,500
Less discounts		—		(123,336	)
Notes payable – PPP, 1% per annum, matures on April 17, 2022		117,713		—
Note payable – monthly interest, 17.00% per annum, matures on September 30, 2022 (The loan is currently in default and currently payable.)		2,500,000		2,500,000
Less discounts		—		—
Subtotal		8,452,221		7,681,164
Less: current portion		8,406,444		7,681,164
Long-term portion	$	45,777	$	—

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Principal payments on the above notes mature as follows:                

2020	$	8,347,587
2021		78,475
2022		26,159
2023		—
2024		—
Thereafter	$	8,452,221

NOTE 6 – Related Party

On January 10, 2018, the Company entered into employment agreement with David Hopkins, its President, effective as of January 1, 2018. Pursuant to the employment agreement, Mr. Hopkins assumed the additional position of Chief Executive Officer of the Company. The employment agreement is for an initial term of three (3) and automatically renews for additional three (3) year periods, provided that the Company achieves Adjusted EBITDA (as defined) of $3,500,000 for any calendar year during the initial term and any renewal term.

The employment agreement provides for an initial base salary of $175,000. In the event in any calendar year during the initial term or any renewal term, HRD achieves Adjusted EBITDA of $3,500,000, Mr. Hopkins’ annual base salary shall automatically increase to $250,000 and in the event in any calendar year during the initial term or any renewal term, the Company achieves Adjusted EBITDA of $5,000,000, his annual base salary shall automatically increase to $325,000. Mr. Hopkins will also receive a $600 per month car allowance while the employment agreement is in effect.

In addition to the foregoing, pursuant to the employment agreement, Mr. Hopkins was granted an option to purchase 525,000 shares of HRD common stock under the Company’s 2015 Stock Incentive Plan at an exercise price of $0.35 per share. The option vests in six equal semi-annual installments commencing September 30, 2018, expires ten (10) years from the date of grant and is otherwise subject to the terms of the Incentive Plan. 

In consideration for David Hopkins, the Company’s Chief Executive Officer and President, assuming the additional duties of President of the Company’s two subsidiaries, CCI and SCLLC, on May 31, 2019, the Company entered into an amended and restated employment agreement with Mr. Hopkins, effective as of April 15, 2019 (the “Effective Date”), which superseded the January 2018 employment agreement between the Company and Mr. Hopkins. The amended and restated employment agreement is for an initial term of three (3) years from the Effective Date and automatically renews for additional three (3) year periods, provided that the subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,000,000 for any calendar year during the initial term and any renewal term.

The amended and restated employment agreement provides for an initial base salary of $250,000. In the event in any calendar year during the initial term or any renewal term, the Subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,000,000, Mr. Hopkins’ annual base salary shall automatically increase to $300,000 and in the event in any calendar year during the initial term or any renewal term, the subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,500,000, his annual base salary shall automatically increase to $350,000. Mr. Hopkins will also receive a $600 per month car allowance while the amended and restated employment agreement is in effect.

The Company had a secured convertible note with a lender for $5 million (see Note 5 and 13).

NOTE 7 – Stockholders’ Deficiency

The Company has authorized 100,000,000 shares of common stock $.001 par value and 5,000,000 shares of preferred stock $.001 par value.

NOTE 8 – 2015 Incentive Stock Plan

Our 2015 Incentive Stock Plan (the “Incentive Plan”) provides for equity incentives to be granted to our employees, executive officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the Incentive Plan, restricted stock awards, other stock based awards, or any combination of the foregoing. The Incentive Plan is administered by the board of directors. 3,000,000 shares of our common stock are reserved for issuance pursuant to the exercise of awards under the Incentive Plan. The number of shares so reserved automatically adjusts upward on January 1 of each year, so that the number of shares covered by the Incentive Plan is equal to 15% of our issued and outstanding common stock. As of September 30, 2020 options to purchase 1,087,500 shares at an exercise price of $0.35 per share have been granted and are outstanding under the Incentive Plan.

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NOTE 9 – Income Taxes

Income tax benefit for the three months ended September 30, 2020 and 2019 was $154,519 and $354,707, respectively. Income tax benefit for the nine months ended September 30, 2020 and 2019 was $454,053 and $461,840, respectively. The effective tax rates for the periods were 27%   respectively. The 2018 tax rate reflects the enactment of the Tax Cuts and Jobs Act of 2017 (the “Act”) which made significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017.

 As of September 30, 2020, the Company has approximately $2,285,367 of federal and state net operating loss carryovers (“NOLs”) which carry forward indefinitely.  

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established $0 valuation allowance against the deferred tax asset relating to NOLs because it is more likely than not that all of the deferred tax asset will be realized.

The Company files U.S. federal and state of Florida and Arkansas tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2016. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.

NOTE 10 – Business Segment Information

The Company has two reportable segments (billing services and OTC and prescription medication) supported by a corporate group which conducts activities that are non-segment specific. The following table present selected financial information about the Company’s reportable segments for the three and nine months ended September 30, 2020 and 2019.

For the three months   ended September 30, 2020	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	343,492		$	250,405	$	93,087	$	—
Cost of Revenue		64,547			—		64,547		—
Long-lived assets		5,289,242			4,800,270		488,972		—
Income (loss) before income tax		(572,218	)		171,861		29,850		(773,929	)
Identifiable assets		1,976,016			1,487,044		488,972		—
Depreciation and amortization		95,556			71,667		23,889		—

For the nine months ended September 30, 2020	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	1,099,213		$	844,644	$	254,569	$	—
Cost of Revenue		174,458			—		174,458		—
Long-lived assets		5,289,242			4,800,270		488,972		—
Income (loss) before income tax		(1,681,602	)		531,966		79,308		(2,292,876	)
Identifiable assets		1,976,016			1,487,044		488,972		—
Depreciation and amortization		286,706			215,030		71,676		—

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For the three months ended September 30, 2019	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	828,302		$	658,970	$	169,332	$	—
Cost of Revenue		127,661			—		127,661		—
Long-lived assets		5,815,666			5,235,282		580,384		—
Income (loss) before income tax		(1,313,728	)		406,299		31,556		(1,751,583	)
Identifiable assets		2,502,440			1,922,056		580,384		—
Depreciation and amortization		121,100			90,825		30,275		—
Impairment loss		1,061,200			—		—		1,061,200

For the nine months ended September 30, 2019	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	2,789,562		$	2,204,414	$	585,148	$	—
Cost of Revenue		431,102			—		431,102		—
Long-lived assets		5,815,666			5,235,282		580,384		—
Income (loss) before income tax		(1,710,516	)		1,368,109		116,891		(3,195,516	)
Identifiable assets		2,502,440			1,922,056		580,384		—
Depreciation and amortization		363,356			272,517		90,839		—
Impairment loss		1,061,200			—		—		1,061,200

NOTE 11 – Litigation

In August 2018, we were served with a complaint (which was amended in September 2018 to include David Hopkins, our CEO, as a defendant), filed in Miami-Dade County, Florida Circuit Court by the seller of CCI and SCLLC. In the complaint, the seller alleges breach of contract and fraud in that we allegedly failed to pay him excess working capital as of the closing of the acquisition of approximately $381,000 and failed to reimburse him for certain credit card expenses. We believe that the seller’s claims are without merit, as his calculation of working capital does not follow the methodology provided for in the Securities Purchase Agreement for the transaction and that in fact, there was a working capital shortfall at closing of approximately $725,000 (for which we demanded payment in September 2018). Moreover, the seller has refused to submit the working capital dispute to the resolution process provided for in the Securities Purchase Agreement. We have answered the complaint denying the seller’s claims and have filed counterclaims against the seller for the sums we believe are do us for the working capital shortfall and for damages arising from seller’s breach of contract, breach of good faith and fair dealing, fraud in the inducement, indemnification obligations under the Securities Purchase Agreement and violation of his non-competition and non-solicitation agreement with the Company.

The parties have engaged in discovery, and we believe that the information obtained thus far supports our claims and refutes the seller’s claims.  On November 18, 2019, the seller filed a motion, asking the court to stay the case temporarily because he believed he was the target of a parallel federal criminal investigation related to facts at issue in the case.  On December 11, 2019, the court granted his motion and stayed the case for 120 days.

The stay issued by the court on December 11, 2019 expired on April 13, 2020. The seller then moved to stay the case for a second time, again claiming that the instant proceedings overlap with an ongoing federal criminal investigation in which he believes he is a target. Health-Right and Mr. Hopkins opposed Burroughs’ second motion to stay, and the court subsequently denied the seller’s motion.  On April 23, 2020, Health-Right filed an amended counterclaim to add claims against the seller for tortious interference with business relationships and breach of the non-compete and non-solicitation provisions of the Securities Purchase Agreement.  The seller has since filed his answer and affirmative defenses to Health-Right’s amended counterclaim.  Also, on April 23, 2020, the seller filed a second amended complaint against Health-Right and Mr. Hopkins, which Health-Right and Mr. Hopkins moved to dismiss as legally insufficient.   On July 15, 2020, the court granted the motion in part and denied the motion in part.  The court granted the motion, in part, by dismissing with prejudice the seller’s claims against Health-Right and Mr. Hopkins for fraudulent misrepresentation and negligent misrepresentation.  Accordingly, Mr. Hopkins is no longer a party to the case, and only seller’s contract-based claims against Health-Right remain.

The parties continued engaging in discovery. Specifically, the seller produced additional documents responsive to Health-Right's request for production and sat for a second deposition on September 23, 2020. Health-Right discovered that the seller attempted to perpetrate a fraud upon the court by, among other things, doctoring several critical emails. At the seller's second deposition, Health-Right confronted the seller about the doctored emails. In response, the seller invoked his Fifth Amendment Privilege against self-incrimination. The seller's counsel subsequently withdrew from representing the seller. Health-Right has moved to strike the seller's pleadings and for the entry of a default judgment against the seller for his actions. Health-Right's motion is pending. 

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In April 2018, Stephen Andrews, the former CEO of CCI, filed a wrongful termination arbitration claim seeking recovery in the amount in excess of $500,000. In addition to raising defenses, the Company has filed a counterclaim alleging violation of non-disclosure/non-compete agreements by Mr. Andrews as well as claims for breach of a non-solicitation agreement, breach of the employee manual and injunctive relief. The final arbitration hearing was scheduled for January 2020.  However, Andrews moved for a stay of the arbitration on November 20, 2019 based on his belief that he is the target of a parallel federal criminal grand jury investigation.  The arbitrator granted the stay on December 17, 2019 and the final arbitration hearing was postponed indefinitely.

NOTE 12 – Concentration

The Company offers physicians and medical clinics an ancillary program to treat their patients with topical prescription medicine to manage pain. The program is designed for patients with work related injuries managed under worker compensation claims. The program both delivers the topical medicine to the care provider for sale to the patient, as well as providing the care provider with insurance claim processing services on behalf of the patient.

Accounts Receivable Concentration

	At September 30, 2020		At December 31, 2019
Number of customers over 10%		5		6
Percentage of accounts receivable		12%, 13%, 16%, 26%, 27%		10%, 12%, 13%, 13%, 15%, 18	%

We have two vendors who represent 100% of purchased products that are sold for nine months 2020 and 2019.

For the three months ended September 30, 2020, the Company had two clinics that represented 12%, and 17% of total revenue. For the three months ended September 30, 2019, the Company had no clinics that represented more than 10% of total revenue. 

For the nine months ended September 30, 2020, the Company had three clinics that represented 11%, 12%, and 17% of total revenue. For the nine months ended September 30, 2019, the Company had no clinics that represented more than 10% of total revenue. 

NOTE 13 – Subsequent Events

The Company has evaluated subsequent events through the date that the financial statements were issued and determined that there were the following subsequent events requiring adjustment to or disclosure in the financial statements.

On October 1, 2020, the Company entered into a one year lease in Arkansas beginning on November 1, 2020 with monthly rent in the amount of $1,210 per month.

On November 16, 2020, effective retroactive to October 1, 2020. the Company restructured the $5,000,000 principal amount senior secured convertible note (the “Original GPB Note”) that the Company had issued to GPB Debt Holdings II, LLC (“GPB”) on September 29, 2017 in connection with financing the Acquisition. The Original GPB Note came due on September 29, 2020.

In connection with the restructuring, the Company entered into an Exchange Agreement with GPB (the “Exchange Agreement”). Pursuant to the Exchange Agreement, (a) the Company made a principal payment of $1,000,000 on the Original GPB Note; (b) issued a new $3,500,00 principal amount senior secured convertible note to GPB; and (c) issued to GPB an additional 3,206,525 shares of the Company’s common stock(“HRD Shares”).

The New GPB Note, which matures on September 30, 2023 (the “Maturity Date”), provides for cash interest at the rate of 8% per annum, which accrues and is payable monthly commencing April 1, 2021. In addition, the New GPB Note also provides for an annual payment of paid in kind interest at the rate of 11.5% for the period from October 1, 2020 through March 31, 2021, and at the rate of 3.0% per annum thereafter.

The New GPB Note (including accrued and unpaid interest) may be prepaid, in whole or in part, at the option of the Company at any time prior to the Maturity Date, so long as a minimum of $200,000 is prepaid each time a repayment is made, upon thirty (30) days’ prior written notice; provided, however, that during such notice period, GPB may exercise its conversion rights described below with respect to the portion of the New GPB Note proposed to be prepaid. No success fee or other premium will be due in connection with an optional prepayment.

In addition to optional prepayment, if on the last day of each calendar quarter prior to the Maturity Date or earlier repayment of the New GPB Note in full, available cash held by the Company in its and its subsidiaries’ bank accounts exceeds $1,000,000, after giving effect to all accruals and expenses accounted for in that calendar quarter, the Company shall make a mandatory prepayment to GPB of $200,000, which shall be applied to reduction of the outstanding principal amount of the New GPB Note.

The New GPB Note is convertible at any time, in whole or in part, at GPB’s option, into HRD Shares at a conversion price of $0.44 per GPB Share, with customary adjustments for stock splits, stock dividends and other recapitalization events.

The New GPB Note (a) provides for customary affirmative and negative covenants, including restrictions on the Company incurring subsequent debt; (b) contains customary event of default provisions; and (c) is secured by a lien on all of the assets of the Company, including its intellectual property, pursuant to an amended and restated security agreement entered into between the Company and GPB.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless the context otherwise requires, references in this report to “HRD,” “Health-Right,” “the Company,” “we,” “our” and “us” refers to Health-Right Discoveries, Inc. and its subsidiaries.

Forward-Looking Statements

Certain statements made in this report are “forward-looking statements” regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Historical Background

Business Overview

Health-Right was founded as a natural biotech company that sought to combine science and nutrition to develop branded ingredients, formulations and products that seek to provide a better quality of life for consumers who primarily suffer from stress-induced viruses and diseases. The Company developed a formulation platform by utilizing and scientifically combining various natural ingredients to help positively influence the interrelationship between stress and the immune system. The Company initially applied the formulation platform to Advanced H-Plex Defense Formula 11, its first product (“H-Plex Defense”), an all-natural dietary supplement whose formulation sought to address less than optimal nutrition and nutritional deficiencies to aid persons afflicted with Herpes Simplex Virus 1. Despite test marketing H-Plex Defense through the end of 2014 and positive customer feedback, HRD was unable to raise sufficient capital to complete development of and commercialize H-Plex Defense.

Accordingly, during 2016, the Company shifted its focus to identifying and exploring various opportunities for growth and revenue generation through the acquisition of other products, technologies or companies in the natural biotech, healthcare, nutraceutical and related fields.

Business Overview

On September 29, 2017, pursuant to a Securities Purchase Agreement dated August 17, 2017, the Company acquired (the “Acquisition”) all the outstanding shares of Common Compounds, Inc., n/k/a CCI Billing, Inc. d/b/a Complete Claim Management (“CCI”) and EZPharmaRx, LLC n/k/a Script Connection, LLC (“SCLLC”). HRD, through its subsidiaries, CCI and SCLLC, along with licensed pharmaceutical wholesalers, offer and provide their respective services to physician practices that desire to prescribe and dispense certain pharmaceutical products and medications in the practice’s office to patients receiving treatment for work-related injuries (“In-Office Dispensing Services”).

CCI offers and provides administrative services and billing services to physician practices (each a “Practice” and collectively, the “Practices”) desiring to make certain over-the-counter products, including non-narcotic topical medications, (“OTC Products”) and certain prescription medications (“Prescription Medications”) available to patients in the physician practice’s office. Each participating Practice is responsible for obtaining and maintaining any necessary and appropriate licenses, permits, or other documentation required to order, receive, store, and dispense OTC Products or Prescription Medications in the Practice’s office in accordance with applicable federal and state law. Such services include, but are not limited to, assisting Practices with insurance claim processing, prior authorization, billing and collections, and recordkeeping. CCI offers its fee-based services to Practices participating in the In-Office Dispensing Program. CCI also provides billing and collection services on behalf of SCLLC in connection with SCLLC’s sales and distribution of OTC Products to Practices participating in the OTC Program.

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SCLLC offers OTC Products to Practices that desire to make such products available to patients in the Practice’s office through participation in the OTC Program. SCLLC is not a compounding pharmacy, and neither CCI nor SCLLC is involved in creating topicals with compounding pharmacies.

SCLLC also assists the Practices in ordering Prescription Medications directly from licensed pharmaceutical wholesalers and oversees the sale and distribution of Prescription Medications to the Practices. SCLLC does not sell any Prescription Medications to Practices and does not profit from the sale of such medications.

Since completion of the Acquisition, the Company has focused on restructuring CCI’s and SCLLC’s business operations and refining their business model to improve efficiency and profitability, as well as expanding those operations.

Effects of the COVID-19 Pandemic

The adverse public health developments and economic effects of the COVID-19 pandemic have and will likely continue to adversely affect the Company’s business as a result of the significant decline in visits to Practices for non-essential medical treatment and hence has decreased the dispensing of OTC Products from and the need for the Company’s billing services by Practices. In addition, the outbreak could potentially lead to an extended economic downturn, which would likely further decrease spending, adversely affect demand for our products and services and harm our business, results of operations and financial condition. The Company cannot accurately predict the long-term effect the COVID-19 pandemic will have on the Company.

Corporate Information

The Company was incorporated in the state of Florida on October 11, 2011 under the name “Four Plex Partners, Inc.” and changed its name to “Health-Right Discoveries, Inc.” on March 22, 2012.

Our executive offices are located at 18851 NE 29th Avenue, Suite 700, Aventura, Florida 33180 and our telephone number is (305) 705-3247. Our corporate website is www.health-right.com. Information appearing on our corporate website is not part of this report.

Results of Operations

Three months ended September 30, 2020 compared to three months ended September 30, 2019

For the three months ended September 30, 2020 we had revenues of $343,492, as compared to $828,302 for the three months ended September 30, 2019. Cost of revenue was $64,547 for the 2020 quarter, as compared to $127.661 for the 2019 quarter. The decline in revenues and cost of revenue from 2019 to 2020 is largely due to the loss of revenue from a key state from which CCI previously generated significant business and the adverse effects of the COVID-19 pandemic on the Company’s business sector, as outlined above. Management is closely assessing operations as the country continues to reopen and the pandemic progresses.

General and administrative costs were $321,308 for the three months ended September 30, 2020, as compared to $479,650 for the three months ended September 30, 2019, with the decrease similarly attributable to the adverse effects of the COVID-19 pandemic on the Company’s business sector and a reduction in legal fees as a result of the stay orders in effect with respect to pending litigation. Interest expense for the 2020 quarter increased approximately 23% to $434,299 from $352,419 for the 2019 quarter. Interest in both periods largely reflects interest on the issuance of notes to the seller and the lender on September 29, 2017, in connection with completing and financing the Acquisition.  As a result of the technical default under such notes as a result of the dispute between the seller and the Company, such notes now accrue interest for financial statement purposes at the higher default rate.

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During the three months ended September 30, 2020, the Company incurred amortization and depreciation of $95,556 related to its intangible assets and property and equipment, as compared to amortization and depreciation of $121,100 for the three months ended September 30, 2019.

During the three months ended September 30, 2019, the Company had an impairment loss of $1,061,200 related to its intangible assets, which was not present in the 2020 quarter.

Income tax benefit for the three months ended September 30, 2020 was $154,519, as compared to income tax benefit of $354,707 for the three months ended September 30, 2019.

The Company had a net loss for the three months ended September 30, 2020 of $417,699, as compared to a net loss of $959,021 for the three months ended September 30, 2019. The decrease in net loss from 2019 to 2020, was largely attributable to the absence of the impairment loss in the 2020quarter, offset in part by the 2020 loss of revenue from a key state from which CCI previously generated significant business and the adverse effects of the COVID-19 pandemic on the Company’s business sector, as outlined above. Management is closely assessing operations as the country continues to reopen and the pandemic progresses.

Nine months ended September 30, 2020 compared to nine months ended September 30, 2019

For the nine months ended September 30, 2020 we had revenues of $1,099,213, as compared to $2,789,562 for the nine months ended September 30, 2019. Cost of revenue was $174,458 for the 2020 period, as compared to $431,102 for the 2019 period. The decline in revenues and cost of revenue from 2019 to 2020 is largely due to the loss of revenue from a key state from which CCI previously generated significant business and the adverse effects of the COVID-19 pandemic on the Company’s business sector, as outlined above. Management is closely assessing operations as the country begins to reopen and the pandemic progresses.

General and administrative costs were $1,016,408 for the nine months ended September 30, 2020, as compared to $1,595,710 for the nine months ended September 30, 2019, with the decrease similarly attributable to the adverse effects of the COVID-19 pandemic on the Company’s business sector and a reduction in legal fees as a result of the stay orders in effect with respect to pending litigation. Interest expense for the 2020 period increased approximately 24% to $1,303,243 from $1,048,710 for the 2019 period. Interest in both periods largely reflects interest on the issuance of notes to the seller and the lender on September 29, 2017, in connection with completing and financing the Acquisition.  As a result of the technical default under such notes as a result of the dispute between the seller and the Company, such notes now accrue interest for financial statement purposes at the higher default rate.

During the nine months ended September 30, 2020, the Company incurred amortization and depreciation of $286,706 related to its intangible assets and property and equipment, as compared to amortization and depreciation of $363,356 for the nine months ended September 30, 2019.

During the nine months ended September 30, 2019, the Company had an impairment loss of $1,061,200 related to its intangible assets, which was not present in the 2020 period.

Income tax benefit for the nine months ended September 30, 2020 was $454,053, as compared to income tax benefit of $461,840 for the nine months ended September 30, 2019.

The Company had a net loss for the nine months ended September 30, 2020 of $1,227,549, as compared to a net loss of $1,248,676 for the nine months ended September 30, 2019. The decrease in net loss from 2019 to 2020, was largely attributable to the absence of the impairment loss in the 2020 period, offset in part by the 2020 loss of revenue from a key state from which CCI previously generated significant business and the adverse effects of the COVID-19 pandemic on the Company’s business sector, as outlined above. Management is closely assessing operations as the country continues to reopen and the pandemic progresses.

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Liquidity and Capital Resources

As of September 30, 2020, total assets were $7,249,303, as compared to $7,911,682 on December 31, 2019, with the decrease being attributable to the amortization of intangible assets and by a decrease in additional cash on hand from operations. Total current liabilities as of September 30, 2020 were $9,978,768, as compared to $9,077,709 as of December 31, 2019. As of September 30, 2020 and December 31, 2019, the Company had long-term liabilities of $45,777 and $381,666, respectively.

After closing of the Acquisition in September 2017, a dispute arose between the seller of CCI and SCLLC and the Company, (which is the subject of pending litigation). Such dispute relates to amounts the Company believes are due it from the seller (a) as a result of a shortfall in working capital at closing of the Acquisition; and (b) pursuant to seller’s indemnification obligations under the Securities Purchase Agreement and violation of his non-competition agreement with the Company. We are seeking to set off certain of the sums we believe are due us against principal and interest payments under the CCI Note, and as such may be deemed to be technically in default thereunder, resulting in a reclassification of certain long-term liabilities to current liabilities effective December 31, 2018, pending resolution of the dispute.

Net cash used in operating activities was $590,266 for the nine months ended September 30, 2020, as compared to net cash provided by operating activities of $390,260 for the nine months ended Sept 30, 2019, primarily, reflecting the reduction in operations.

Net cash provided by financing activities was $117,713 for the nine months ended as September 30, 2020 compared to $0 for the nine months ended September 30, 2019, reflecting the company obtain loans under the Paycheck Protection Program with Iberia Bank.

On November 16, 2020, effective retroactive to October 1, 2020. the Company restructured the $5,000,000 principal amount senior secured convertible note (the “Original GPB Note”) that the Company had issued to GPB Debt Holdings II, LLC (“GPB”) on September 29, 2017 in connection with financing the Acquisition. The Original GPB Note came due on September 29, 2020.

In connection with the restructuring, the Company entered into an Exchange Agreement with GPB (the “Exchange Agreement”). Pursuant to the Exchange Agreement, (a) the Company made a principal payment of $1,000,000 on the Original GPB Note; (b) issued a new $3,500,00 principal amount senior secured convertible note to GPB; and (c) issued to GPB an additional 3,206,525 shares of the Company’s common stock(“HRD Shares”).

The New GPB Note, which matures on September 30, 2023 (the “Maturity Date”), provides for cash interest at the rate of 8% per annum, which accrues and is payable monthly commencing April 1, 2021. In addition, the New GPB Note also provides for an annual payment of paid in kind interest at the rate of 11.5% for the period from October 1, 2020 through March 31, 2021, and at the rate of 3.0% per annum thereafter.

The New GPB Note (including accrued and unpaid interest) may be prepaid, in whole or in part, at the option of the Company at any time prior to the Maturity Date, so long as a minimum of $200,000 is prepaid each time a repayment is made, upon thirty (30) days’ prior written notice; provided, however, that during such notice period, GPB may exercise its conversion rights described below with respect to the portion of the New GPB Note proposed to be prepaid. No success fee or other premium will be due in connection with an optional prepayment.

In addition to optional prepayment, if on the last day of each calendar quarter prior to the Maturity Date or earlier repayment of the New GPB Note in full, available cash held by the Company in its and its subsidiaries’ bank accounts exceeds $1,000,000, after giving effect to all accruals and expenses accounted for in that calendar quarter, the Company shall make a mandatory prepayment to GPB of $200,000, which shall be applied to reduction of the outstanding principal amount of the New GPB Note.

The New GPB Note is convertible at any time, in whole or in part, at GPB’s option, into HRD Shares at a conversion price of $0.44 per GPB Share, with customary adjustments for stock splits, stock dividends and other recapitalization events.

The New GPB Note (a) provides for customary affirmative and negative covenants, including restrictions on the Company incurring subsequent debt; (b) contains customary event of default provisions; and (c) is secured by a lien on all of the assets of the Company, including its intellectual property, pursuant to an amended and restated security agreement entered into between the Company and GPB (the “A & R Security Agreement”).

The above descriptions of the Exchange Agreement, the New GPB Note and the A & R Security Agreement are qualified in their entirety by reference to the copies of the Exchange Agreement, the New GPB Note and the A & R Security Agreement filed as Exhibits 10.1, 10.2 and 10.3 to this report.

The Company believes that given the restructuring of its debt, the Company’s existing capital resources when combined with anticipated cash flow from operations, will allow it to fund its operations for the next twelve (12) months.. There can be no assurance that we will be able to do so or secure financing, when required, on commercially reasonable terms. Any such additional financing may dilute the interests of existing shareholders. The absence of additional financing, when needed, could substantially harm the Company, its business, results of operations and financial condition. These factors among others, raise substantial doubt regarding the Company’s ability to continue as a going concern.

Critical Accounting Policies

Revenue Recognition

As of January 1, 2018, the Company adopted ASU 2014-09 and all subsequent ASUs that modified ASC 606. As part of the implementation process the Company performed an analysis to identify accounting policies that needed to change and additional disclosures that are required. The Company considered factors such as customer contracts with unique revenue recognition considerations, the nature and type of goods and services offered, the degree to which contracts include multiple performance obligations or variable consideration, and the pattern in which revenue is currently recognized, among other things. All of the Company’s revenue streams were evaluated, and similar performance obligations resulted under the new standard. In addition, the Company considered recognition under the new standard and concluded the timing of the Company’s revenue recognition will remain the same. The Company has also evaluated the changes in controls and processes that are necessary to implement the new standard, and no material changes were required.

CCI’s revenue predominantly represents consulting services agreements, which included providing services to physicians for billing insurance companies. The amounts reported as revenue are net of amounts remitted.

SCLLC’s revenue from the sale of products are recognized when the sale is consummated, and title is transferred. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in the sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. As such, management has identified the transfer of the asset as the performance obligation. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation discussed above, in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. As such, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606.

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Accounting for Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASC 842”) that amends the accounting guidance on leases for both lessees and lessors. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve (12) months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The FASB also subsequently issued amendments to the standard, including providing an additional and optional transition method to adopt the new standard, described below, as well as certain practical expedients related to land easements and lessor accounting. The amendments in this accounting standard update are effective for the Company on January 1, 2019, with early adoption permitted. The Company adopted this accounting standard update effective January 1, 2019.

Intangible Assets

Intangible assets consist primarily of the Tradenames, IP Technologies, Customer list, and a Non-compete agreement resulting from an acquisition. These intangible assets have finite lives and are amortized over the periods in which they provide benefit. The Company assesses the impairment of long-lived assets, including identifiable intangible assets subject to amortization, whenever significant events or significant changes in circumstances indicate the carrying value may not be recoverable. Intangible assets with indefinite lives, are subject to impairment testing in accordance with accounting standards governing such on an annual basis, or more frequently if an event or change in circumstances indicates that the fair value of a reporting unit has been reduced below its carrying value. See Note 4 to the unaudited consolidated financial statements for disclosure on intangible assets.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates included deferred revenue, costs incurred related to deferred revenue, the useful lives of property and equipment, the useful lives of intangible assets and accounting for the business combination.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.

ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

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Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3. Quantitative Disclosures About Market Risks.

As a “smaller reporting company,” we are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

Management’s Report on Disclosure Controls and Procedures

Our President and Chief Executive Officer, as our principal Executive, Financial and Accounting Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, as of September 30, 2020, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the Securities and Exchange Commission (the “SEC”), including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our President, as our Principal Executive, Financial and Accounting Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our President has concluded that as of September 30, 2020, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in Item 9A(b) of our Annual Report on Form 10-K for the year ended December 31, 2019.

Our President and Chief Executive Officer, as our principal Executive, Financial and Accounting Officer, does not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officer has determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

In addition, to matters previously reported in our periodic reports filed with the SEC under the Securities Exchange Act of 1934, as amended, from time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. 

None.

Item 1A. Risk Factors.

As a “smaller reporting company,” we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On November 16, 2020, in connection with the restructuring of its debt to GPB Debt Holdings II, LLC (“GPB”), the Company issued to GPB 3,206,525 shares of its common stock. Such shares were issued to GPB pursuant to the exemption from registration afforded by Section 4(2)(a) under the Securities Act of 1933, as amended.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number	Description of Exhibit
10.1	Exchange Agreement dated as of November 16, 2020, by and between the Company and
10.2	GPB Senior Secured Promissory Note dated as of October 1, 2020
10.3	Amended and Restated Security Agreement dated as of November 16. 2020
31.1	Section 302 Certification
32.1	Section 906 Certification
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HEALTH-RIGHT DISCOVERIES, INC.
Dated:  November 18, 2020	By:	/s/ David Hopkins
		David Hopkins, President and Chief Executive Officer
		(Principal Executive, Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT (the “Agreement”) is dated as of November 16, 2020, by and between Health-Right Discoveries, Inc., a Florida corporation (the “Company”), and GPB Debt Holdings II LLC (“Lender”).

WHEREAS:

A.       The Company is indebted to Lender, as evidenced by that certain Senior Secured Promissory Note, dated September 29, 2017, in the original principal amount of $5,000,000 (the “ Original Note”).

B.       The Original Note matured on September 29, 2020 and has a balance of $5,834,508 due thereunder;

C.       The Company and the Lender have agreed to exchange the Original Note for a (i) a $1,000,000 cash payment upon the execution of this Agreement; (ii) a new Senior Secured Promissory Note from the Company in the principal amount of $3,500,000, in the form attached hereto as Exhibit C (the “New Note”); and (iii) such number of shares of the Company’s common stock, $0.001 par value, which when added to the current number of shares of the Company’s common stock owned by Lender shall represent twenty five percent (25%) of the fully diluted outstanding securities of the Company on a fully converted basis (the “Shares”); the New Note and the Shares are collectively referred to herein as the “Securities”).

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:

1.       Exchanges.

1.1       Exchange. Lender and the Company hereby exchange the Original Note, including all remaining accrued interest thereon, which Original Note together with all accrued interest thereon, will be immediately cancelled by the Company, for the Securities, without the payment of any additional consideration. In connection with the issuance of the New Note, the Company shall enter into that certain Amended and Restated Security Agreement, dated as of November 1, 2020, with Lender (the “Security Agreement”; this Agreement, the New Note, the Security Agreement together with any documents securing the liens of the Lender thereunder, and any related documents are hereinafter collectively referred to as the “Transaction Documents”).

1.2       Delivery. In exchange for the Original Note, the Company hereby issues to Lender the Securities and upon execution of this Agreement shall pay to Lender via wire transfer to the account set forth on Exhibit B hereto a $1,000,000 cash payment.

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2.         Company Representations and Warranties.

2.1       Authorization and Binding Obligation. The Company has the requisite power and authority to enter into and perform its obligations under the Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. The execution and delivery of this Agreement and the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Securities and the granting of a first lien, senior security interest to secure the New Note, have been duly authorized by the Company. This Agreement and each of the Transaction Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws.

2.2       No Conflict. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and by the Transaction Documents (including, without limitation, the issuance of the Securities) will not: (i) result in a violation of the organizational documents of the Company; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party; or (iii) result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which any property or asset of the Company is bound or affected except, in the case of clause (ii) above, to the extent such violations that could not reasonably be expected to have a material adverse effect on the Company.

2.3       Representations and Warranties. Except as set forth on Schedule 2.3 hereto, the representations and warranties of the Company set forth in Section 3.1 of that certain Securities Purchase Agreement, dated September 29, 2017 (the “Purchase Agreement”), by and between the Company and Lender, are true and correct as of the date hereof.

2.4       Capitalization. Set forth on Schedule 2.4 hereto, is the current capitalization of the Company, which sets forth the issued and outstanding equity securities, debt securities and all securities convertible or exercisable into equity or debt of the Company. Except as set forth on Schedule 2.4 hereto, none of the outstanding capital stock of the Company is entitled or subject to any purchase option, call option, right of first refusal, preemptive right, right of participation, subscription right or any similar right. The Company is not under any obligation or bound by any contract or agreement pursuant to which it may become obligated (i) to issue, repurchase, redeem or otherwise acquire any outstanding capital stock of the Company; or (ii) make any investment (in the form of a loan or capital contribution) in any other entity.

3.       Lender Representations and Warranties. As a material inducement to the Company to enter into this Agreement and consummate the Exchange, Lender represents, warrants and covenants with and to the Company as follows:

3.1       Ownership of the Original Note. Lender owns the Original Note free and clear of any liens and the Original Note has not been pledged to any third party. Lender has not sold, assigned, conveyed, transferred, mortgaged, hypothecated, pledged or encumbered or otherwise permitted any lien to be incurred with respect to the Original Note or any portion thereof. No person other than Lender has any right or interest in the Original Note.

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3.2       Proceedings. To the knowledge of Lender, no proceedings relating to the Original Note are pending or threatened before any court, arbitrator or administrative or governmental body that would adversely affect Lender’s right and ability to surrender and exchange the Original Note.

3.3       Reliance on Exemptions. Lender understands that the Securities are being offered and exchanged in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Lender’s compliance with, the representations, warranties, agreements and acknowledgments of Lender set forth herein in order to determine the availability of such exemptions and the eligibility of Lender to acquire the Securities.

3.4       No Governmental Review. Lender understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

3.5       Validity; Enforcement. Lender has the requisite power and authority to enter into and perform its obligations under this Agreement and to exchange the Original Note in accordance with the terms hereof. This Agreement has been duly and validly authorized, executed and delivered on behalf of Lender and shall constitutes the legal, valid and binding obligations of Lender enforceable against Lender in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws.

3.6       No Conflicts. The execution, delivery and performance by Lender of this Agreement and the consummation by Lender of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of Lender; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Lender is a party; or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to Lender, except in the case of clause (ii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Lender to perform its obligations hereunder

3.7       Action. The Lender has taken no action that would impair its ability to exchange the Original Note.

3.8       No Public Sale or Distribution. The Lender is acquiring the Securities for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted thereunder. The Lender does not presently have any agreement or understanding, directly or indirectly, with any person to distribute any of the Securities issuable upon conversion thereof, for its own account and not with a view towards, or for resale in connection with, the public securities in violation of applicable securities laws.

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3.9       Information. The Lender and its advisors, if any, are knowledgeable, sophisticated and experienced in making, and Lender is qualified to make decisions with respect to, investments in shares presenting an investment decision like that involved in the exchange of the Note for the Securities and have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Lender. The Lender and its advisors, if any, have been afforded the opportunity to ask questions of the Company. The Lender understands that its investment in the Securities involves a high degree of risk. The Lender has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

3.10       Accredited Investor. The Lender is an accredited investor pursuant to Rule 501 of Regulation D under the Securities Act of 1933, as amended.

3.11       Legend. Lender acknowledges that (i) the sale and resale of the Securities have not been registered under the Securities Act of 1933, as amended or any applicable state securities laws, and the Securities may not be transferred unless (a) such securities are sold pursuant to an effective registration statement under the Securities Act of 1933 Act, as amended or (b) Lender shall have delivered to the Company an opinion of counsel in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, the substance of which opinion shall be reasonably acceptable to the Company. Until such time as the Securities have been registered under the Securities Act of 1933 Act, as amended or may be sold pursuant to an exemption thereunder, the Securities shall bear a restrictive legend in substantially the following form:

“THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THIS SECURITY MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT, THE SUBSTANCE OF WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”

4.       Miscellaneous.

4.1       Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (other than Sections 5-1401 and 5-1402 of New York’s General Obligations Law). The Parties irrevocably consent to the exclusive jurisdiction and venue of any state or federal court within New York County, New York, in connection with any matter based upon or arising out of this Agreement or the matters contemplated herein and agrees that process may be served upon them in any manner authorized by the laws of the State of New York for such persons.

4.2       Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. Delivery of signatures by pdf or other electronic transmission shall be legal, valid and binding execution and delivery.

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4.3       Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

4.4       Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

4.5       Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between Lender and the Company with respect to the matters discussed herein including without limitation, the Purchase Agreement, and this Agreement contains the entire understanding of the parties with respect to the matters covered herein and, except as specifically set forth herein, none of the Company or the Lender makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and Lender. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought.

IN WITNESS WHEREOF, Lender and the Company have caused this Agreement to be duly executed as of the date first written above.

HEALTH-RIGHT DISCOVERIES, INC.
By:	/s/ David Hopkins
	David Hopkins, Chief Executive Officer
GPB DEBT HOLDINGS II LLC
By:	/s/ David Gentile
	Name: David Gentile
	Title: Manager

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EX-10.2

Exhibit 10.2

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURJTIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: October 1, 2020 $3,500,000

SENIOR SECURED CONVERTIBLE NOTE

THIS SENIOR SECURED CONVERTIBLE NOTE (the “Note”) is a duly authorized and validly issued Senior Secured Convertible Note issued by Health-Right Discoveries, Inc., a Florida corporation (the “Company”).

FOR VALUE RECEIVED, the Company promises to pay to GPB Debt Holdings II LLC or its registered assigns (the “Holder”), the principal sum of $3,500,000 (“Original Principal Amount”) on September 30, 2023 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest (including PIK Interest) to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:

Section 1.     Definitions. For the purposes hereof, (a) capitalized terms not otherwise defined herein shall have the meanings given in the Exchange Agreement, and (b) the following terms shall have the following meanings:

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule l-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, or (f) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d).

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

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“Buy-In” shall have the meaning set forth in Section 4(c)(v).

“Cash Interest” has the meaning set forth in Section 2(a).

“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d- 5(b)(l) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion, exercise or exchange of the Note or the Securities held together with the Note), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the shareholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the shareholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

“Collateral Agent” means the agent appointed on behalf of the Purchaser in the Security Agreement.

“Conversion” shall have the meaning ascribed to such term in Section 4.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.

“Default Interest Rate” shall have the meaning set forth in Section 2(b).

“Deferred Cash Interest” has the meaning set forth in Section 2(a).

“DWAC” means the Deposit or Withdrawal at Custodian system at The Depository Trust Company.

“Event of Default” shall have the meaning set forth in Section 7(a).

“Exchange Agreement” means the Exchange Agreement, dated as of November 1, 2020, by and between the Company and the original Holder, as amended, modified or supplemented from time to time in accordance with its terms.

“Fundamental Transaction” shall have the meaning set forth in Section 5(e).

“Mandatory Default Amount” means the sum of (a) 120% of the outstanding principal amount of this Note, plus 120% of accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Note.

“New York Courts” shall have the meaning set forth in Section 8(e).

“Note Register” shall mean the note register maintained by the Company.

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“Notice of Conversion” shall have the meaning set forth in Section 4(a).”Original Issue Date” means the date of the first issuance of the Note, regardless of any transfers of the Note and regardless of the number of instruments which may be issued to evidence the Note.

“Permitted Indebtedness” means (a) Indebtedness outstanding as of the Original Issue Date, including without limitation , the Burroughs Note, (b) the indebtedness evidenced by the Note, (c) trade debt incurred in the normal course of business, (d) capital lease obligations and purchase money indebtedness incurred in connection with the acquisition of machinery and equipment and in accordance with the Security Agreement; and (e) Indebtedness of up to $25,000, including Indebtedness incurred in connection with subsequent acquisitions, provided such Indebtedness shall not be senior to or pari passu with the Indebtedness evidenced by the Note.

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP, (b) Liens imposed by Law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clauses (a) and (b) of the definition of “Permitted Indebtedness,” and (d) Liens incurred in connection with Permitted Indebtedness under clause (c) of the definition of “Permitted Indebtedness,” provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased.

“PIK Interest” has the meaning set forth in Section 2(a).

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Security Agreement” means the Amended and Restated Security Agreement dated November 1, 2020, by and between the Company and the Collateral Agent.

“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).

“Successor Entity” shall have the meaning set forth in Section 5(e).

“Trading Day” means a day on which the principal Trading Market is open for trading.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or any market of the OTC Markets, Inc. (or any successors to any of the foregoing).

Section 2.     Interest.

(a)       Calculation of Interest. Interest shall accrue to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of (i) 11.5% per annum payable in kind (the “Deferred Interest”), compounded annually by capitalizing the PIK Interest annually calculated on the basis of a 360-day year, which shall accrue monthly commencing on the Original Issue Date until April 1; 2021; (ii) 8% per annum (the “Cash Interest”), calculated on the basis of a 360-day year, which shall accrue monthly commencing on April 1, 2021; and (iii) 3.5% per annum payable in kind (the “PIK Interest”), compounded annually by capitalizing the PIK Interest annually, calculated on the basis of a 360-day year commencing on April 1, 2021. Unless otherwise specifically set forth herein, references in this Note to “interest” refer to the Deferred Cash Interest, Cash Interest and PIK Interest.

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(b)       Interest Following an Event of Default. If an Event of Default has occurred and is continuing, all outstanding principal of and accrued and unpaid interest on this Note (whether Deferred Cash Interest, Cash Interest or PIK Interest) and any other past due amounts owing hereunder will bear interest at the amounts specified in Section 2(a) plus 5% percent per annum with respect to each of clause (i) and (ii) in Section 2(a) (the “Default Interest Rate” ). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the calendar day immediately following the date of such cure; provided that the interest as calculated and unpaid at the Default Interest Rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.

(c)       Payments. The Cash Interest shall accrue as provided in Section 2(a) and be paid monthly on the last day of each calendar month until payment in full of the outstanding principal (or conversion thereof to the extent applicable), together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. The Deferred Interest and the PIK Interest shall accrue and be capitalized as provided in Section 2(a) and shall be paid, together with all accrued and unpaid Cash Interest, liquidated damages and other amounts which may become due hereunder, at such time as the outstanding principal (or conversion thereof to the extent applicable) shall become due and payable in full.

(d)       Optional Prepayment. The Note (including accrued and unpaid interest) may, at the option of the Holder, be prepaid, in whole or in part, at any time and from time to time prior to the Maturity Date, so long as a minimum of $200,000 is prepaid each time a prepayment is made. In order to prepay the Note (or any portion thereof), the Company shall provide 30 days prior written notice to the Holder, during which time the Holder may convert the Note in whole or in part at the Conversion Price. Any prepayments made pursuant to this Section 2(d) shall be applied first, to accrued and unpaid Cash Interest, second to accrued and unpaid PIK Interest (whether such PIK Interest has been capitalized or not) and third, to the then aggregate unconverted and outstanding principal amount of this Note.

(e)       Mandatory Repayment. At any time that available cash held by the Company in its and its subsidiaries’ bank accounts on the last day of each calendar quarter exceeds $1,000,000, after giving effect to all accruals and expenses accounted for in that calendar quarter, the Company shall make a payment to Lender of $200,000 until such time as all amounts owed under the Note has been irrevocably paid to Lender in full. Any payments made pursuant to this Section 2(e) shall be applied to reduction of the then aggregate unconverted and outstanding principal amount of this Note.

Section 3.     Registration of Transfers and Exchanges.

(a)       Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations (of no less than $1,000 in principal amount), as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

(b)       Investor Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

(c)       Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

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Section 4.     Conversion.

(a)       Voluntary Conversion. After the Original Issue Date until this Note is no longer outstanding, and provided that that the provisions of Rule 144 under the Securities Act so permit (if applicable), this Note shall be convertible, in whole or in part, at any time, and from time to time, into shares of Common Stock at the option of the Holder. The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount(s) converted in each conversion, the date of each conversion, and the Conversion Price in effect at the time of each conversion. The Company may deliver an objection to any Notice of Conversion within one Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

(b)       Conversion Price. The “Conversion Price” in effect on any Conversion Date means, as of any Conversion Date or other date of determination , $0.44.

(c)       Mechanics of Conversion or Prepayment.

(i)          Conversion Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted by (y) the Conversion Price in effect at the time of such conversion.

(ii)         Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver , or cause to be delivered, to the Holder any certificate or certificates required to be delivered by the Company under this Section 4(c).

(iii)        Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or ce11ificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

(iv)       Partial Liquidated Damages. ff the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the tenth Trading Day after such Conversion Date) for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 7 hereof for the Company’s failure to deliver Conversion Shares or, if applicable, cash, within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at Law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable Law.

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(v)        Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(c)(ii) , and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In” ), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at Law or in equity including , without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

(vi)      Reservation of Shares Issuable Upon Conversion. The Company covenants that it will reserve and keep available out of its authorized and unissued shares of Common Stock for the purpose of issuances upon conversion of this Note and the issued with this Note, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Note), not less than the amount of shares of Common Stock as shall from time to time be sufficient to effect the conversion of the outstanding principal amount of this Note; and if at any time the number of authorized but unissued shares of Common Stock shall be insufficient to effect such conversion, the Company shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. The Company covenants that all shares of Common Stock that shall be issuable upon conversion of this Note shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

(vii)       Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

(viii)     Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such ce1tificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same- day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

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(d)       Holder’s Conversion Limitations. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Note or the Warrants) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’ s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following : (i) the Company’s most recent periodic or annual report filed with the SEC, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase the Beneficial Ownership Limitation provisions of this Section 4(d) solely with respect to the Holder’s Note, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the provisions of this Section 4(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The Holder may also decrease the Beneficial Ownership Limitation provisions of this Section 4(d) solely with respect to the Holder’s Note at any time, which decrease shall be effectively immediately upon delivery of notice to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

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Section 5.     Certain Adjustments.

(a)       Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Note or pursuant to any of the other Transaction Documents), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b)       Intentionally Omitted.

(c)       Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues or sells any Common Stock, Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent)).

(d)       Pro Rata Distributions. During such time as this Note is outstanding, if the Company shall declare or make any dividend or other distribution of its assets or rights or warrants to acquire its assets, or subscribe for or purchase any security other than Common Stock, to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend spin-off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation with respect to the Company or any other publicly-traded corporation subject to Section 13(d) of the Exchange Act, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation with respect to the Company or any other publicly-traded corporation subject to Section 13(d) of the Exchange Act).

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(e)       Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation on the conversion of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule l3e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a person or entity not traded on a Trading Market, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable concurrently with the consummation of the Fundamental Transaction, purchase this Note from the Holder by paying to the Holder the product of (a) the number of Conversion Shares issuable upon full conversion of this Note (without regard to any limitation on conversion of this Note) and (b) the positive difference between the cash per share paid in such Fundamental Transaction minus the then in effect Conversion Price. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the Conversion Price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Notwithstanding anything in this Section 5(e), an Exempt Issuance shall not be deemed a Fundamental Transaction.

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(f)        Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

(g)       Notice to the Holder.

(i)          Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(ii)         Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least ten calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains material, non-public information regarding the Company or any of the Subsidiaries (as determined in good faith by the Company,)the Company or its successor shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

Section 6.     Negative Covenants. As long as any portion of this Note remains outstanding, unless the holders of a majority in principal amount of the then outstanding Note shall have otherwise given prior written consent, the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

(a)       other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

(b)       other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

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amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

(c)       other than pursuant to an Exempt Issuance, repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents;

(d)       repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Note if on a pro-rata basis, other than regularly scheduled principal and interest payments as such terms are in effect as of the Original Issue Date including, without limitation, the indebtedness of the Company to Hunter Burroughs included in Permitted Indebtedness, provided that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist or occur provided, however, this covenant shall not apply with respect to the exercise of any Holder’s conversion under Section 4;

(e)       other than pursuant to an Exempt Issuance, pay cash dividends or distributions on any equity securities of the Company;

(f)        enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the SEC assuming that the Company is subject to the Securities Act or the Exchange Act, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval) or except for repayment of the indebtedness of the Company to Hunter Burroughs included in Permitted Indebtedness; or

(g)       enter into any agreement with respect to any of the foregoing.

Section 7.     Events of Default.

(a)       “Event of Default” means , wherever used here in, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of Law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i)          any default in the payment of (A) the principal amount of any Note or (B) interest, late fees, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within the greater of three Trading Days or five calendar days;

(ii)         the Company shall fail to observe or perform any other covenant or agreement contained in the Note (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xi) below) or any Transaction Document which failure is not cured, if possible to cure, within the earlier to occur of (A) 10 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 20 Trading Days after the Company has become aware of such failure;

(iii)       [RESERVED];

(iv)       any representation or warranty made in this Note, any other Transaction Document, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder pursuant hereto or thereto shall be untrue or incorrect in any material respect as of the date when made or deemed made;

(v)         the Company or any Significant Subsidiary (as such term is defined in Rule l - 02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

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(vi)       the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $25,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable and such default is not cured within 10 Trading Days;

(vii)      once listed or quoted, the Common Stock shall not be eligible for listing or quotation for trading on its Trading Market for a period longer than 10 Trading Days;

(viii)     the Company shall have consummated a Change of Control Transaction or/Fundamental Transaction without the Lead Investors consent without paying in full all amounts owed under the Note at or prior to such consummation;

(ix)        a final judgment for the payment of money aggregating in excess of $25,000 is rendered against the Company and/or any of its Subsidiaries and which judgment is not, within 45 days after the entry thereof, bonded, discharged or stayed pending appeal, or is not discharged within 60 days after the expiration of such stay; provided, however, any judgment that is covered by insurance or an indemnity from a credit-worthy party will not be included in calculating the amount of the judgment so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such judgment; or

(x)         the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Note in accordance with the terms hereof.

(b)       Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Note, plus accrued but unpaid interest (including Cash Interest and PIK Interest), liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable Law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 7(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

(c)       Interest Rate Upon Event of Default. Commencing on the occurrence of any Event of Default and until such Event of Default is cured, this Note shall accrue interest at an interest rate equal to the Default Interest Rate.

(d)       Conversion Price Upon Event of Default. Commencing on the occurrence of any Event of Default, all amounts due under the Note shall be increased by 20%.

Section 8.     Miscellaneous.

(a)       No Rights as Stockholder Until Conversion. This Note does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the conversion hereof other than as explicitly set forth in Section 4.

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(b)       Notices. All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by Federal Express or similar receipted next business day delivery, as follows:

If to the Company:	Health-Right Discoveries, Inc. 18851 NE 29th Avenue, Suite 700 Aventura, Florida 33180 Telephone No.: (305) 705-3247 Facsimile No.: Attention: David Hopkins, President E-mail: dhopkins@health-right.com
with a copy to:	Gutierrez Bergman Boulris, PLLC 901 Ponce De Leon Blvd., Suite 303 Coral Gables, FL 33140 Telephone No.: (305) 358-5100 Facsimile No.: (888) 281-1829 Attention: Dale S. Bergman, Esq. E-mail: dale.bergman@gbbpl.com
If to Holder:	GPB Debt Holdings II LLC 535 West 24th Street, 4th Floor New York, NY 10011 Telephone No.: Facsimile No.: Attention: Evan Myrianthopoulos E-mail: emyrian@gpb-cap.com
With a copy to:	Gracin & Marlow, LLP The Chrysler Building 405 Lexington Avenue, 26th Floor New York, New York 10174 Telephone No.: (212) 907-6457 Facsimile No.: (212) 208-4657 Attention: Leslie Marlow, Esq. E-mail: lmarlow@gracinmarlow.com

or to such other address as any of them, by notice to the other may designate from time to time. Time shall be counted to, or from, as the case may be, the date of delivery.

(c)       Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest and late fees, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company. This Note ranks pari passu with all other Note now or hereafter issued under the Purchase Agreement.

(d)       Lost or Mutilated Note. If this Note shall be mutilate d, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company. The applicant for a new Note under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of the new Note.

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(e)       Exclusive Jurisdiction; Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall only be commenced in the state and federal courts sitting in New York, New York (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable Law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable Law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.

(f)        Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.

(g)       Severability. If any provision of this Note is invalid , illegal or unenforceable, the balance of this Note shall remain in effect, as long as the essential terms and conditions of this Note for each party remain valid, binding, and enforceable. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable Law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable Law.

(h)       Remedies, Characterizations, Other Obligations. Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at Law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at Law for any such breach would be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.

(i)        Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

HEALTH-RIGHT DISCOVERIES INC.
By:	/s/ David Hopkins
	David Hopkins, President

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ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Senior Convertible Note due October 31, 2023 issued by Health-Right Discoveries, Inc., a Florida corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the bolder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

Number of shares of Common Stock to be issued:

Signature:

Name:

DWAC Instructions:

Broker No:

Account No:

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Schedule 1

CONVERSION SCHEDULE

The Senior Convertible Note due on November 1, 2023 in the original principal amount of $3,500,000 is issued by Health-Right Discoveries, Inc., a Florida corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.

Dated:

Date of
Conversion (or
for first entry,
Original Issue
Date)  Amount of
Converted
Principal  Aggregate Principal
Amount Remaining
Subsequent to
Conversion (or original Principal
Amount)  Applicable
Conversion Price  Company Attest

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EX-10.3

Exhibit 10.3

AMENDED AND RESTATED SECURITY AGREEMENT

THIS AMENDED AND RESTATED SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) dated as of November 13, 2020, is by and among Health-Right Discoveries, Inc., a Florida corporation (the “Company”, and together with each other Person who becomes a party to this Agreement by execution of a joinder in the form of Exhibit A attached hereto being hereinafter sometimes referred to individually as a “Debtor” and, collectively, as the “Debtors”), and GPB Debt Holdings II LLC, a limited liability company, in its capacity as Collateral Agent and Purchaser (together with its successors and assigns, the “Secured Party”), and amends and restates in its entirety that certain Security Agreement, dated September 29, 2017, by and among the Debtors and the Secured Party.

W I T N E S S E T H:

WHEREAS, pursuant to the Exchange Agreement (as hereafter defined), the Secured Party will exchange a certain senior secured note dated September 29, 2017 purchased from the Company pursuant to the Purchase Agreement (as hereinafter defined) for a certain senior secured note issued by the Company in the principal amount of $3,500,000 (such note, together with any promissory notes or other securities issued in exchange or substitution therefor or replacement thereof, and as any of the same may be amended, supplemented, restated or modified and in effect from time to time, the “Notes”);

AND WHEREAS, the Notes are being acquired by the Secured Party, and the Secured Party has made certain financial accommodations to the Company pursuant to an Exchange Agreement dated as of the date hereof by and between the Company and the Secured Party (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Exchange Agreement”) and the Notes;

AND WHEREAS, each Debtor will derive substantial benefit and advantage from the financial accommodations to the Company set forth in the Exchange Agreement and the Notes, and it will be to each such Debtor’s direct interest and economic benefit to assist the Company in procuring said financial accommodations from the Secured Party;

AND WHEREAS, to induce the Secured Party to enter into the Exchange Agreement and accept the Notes thereunder, each Debtor will pledge and grant a security interest in all of its right, title and interest in and to the Collateral (as hereinafter defined) as security for its Obligations for the benefit of the Secured Party and its successors and assigns;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.           Definitions . Capitalized terms used herein without definition and defined in the Transaction Documents between the Company and Secured Party are used herein as defined therein. In addition, as used herein:

“Accounts” means any “account,” as such term is defined in the UCC, and, in any event, shall include, without limitation, “supporting obligations” as defined in the UCC.

“Chattel Paper” means any “chattel paper,” as such term is defined in the UCC.

“Collateral” shall have the meaning ascribed thereto in Section 3 hereof.

“Commercial Tort Claims” means “commercial tort claims”, as such term is defined in the UCC. 

“Contracts” means all contracts, undertakings, or other agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which a Debtor may now or hereafter have any right, title or interest, including, without limitation, with respect to an Account, any agreement relating to the terms of payment or the terms of performance thereof.

“Copyrights” means any copyrights, rights and interests in copyrights, works protectable by copyrights, copyright registrations and copyright applications, including, without limitation, the copyright registrations and applications listed on Schedule III attached hereto (if any), and all renewals of any of the foregoing, all income, royalties, damages and payments now and hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.

“Deposit Accounts” means all “deposit accounts” as such term is defined in the UCC, now or hereafter held in the name of a Debtor.

“Documents” means any “documents,” as such term is defined in the UCC, and shall include, without limitation, all documents of title (as defined in the UCC), bills of lading or other receipts evidencing or representing Inventory or Equipment.

“Equipment” means any “equipment,” as such term is defined in the UCC and, in any event, shall include, Motor Vehicles.

“Event of Default” shall have the meaning set forth in the Notes.

“Excluded Assets” means any lease, license or other agreement or any property subject to a capital lease, purchase money security interest or similar arrangement, to the extent that a grant of a Lien thereon in favor of Secured Party would violate or invalidate such lease, license, agreement or capital lease, purchase money security interest or similar arrangement or create a right of termination in favor of any other party thereto (other than the Debtors), so long as such provision exists and so long as such lease, license or agreement was not entered into in contemplation of circumventing the obligation to provide Collateral hereunder or in violation of the Transaction Documents, other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law including the bankruptcy code, or principles of equity.

“General Intangibles” means any “general intangibles,” as such term is defined in the UCC, and, in any event, shall include, without limitation, all right, title and interest in or under any Contract, models, drawings, materials and records, claims, literary rights, goodwill, rights of performance, Copyrights, Trademarks, Patents, warranties, rights under insurance policies and rights of indemnification.

“Goods” means any “goods”, as such term is defined in the UCC, including, without limitation, fixtures and embedded Software to the extent included in “goods” as defined in the UCC.

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“Governmental Authority” means the government of the United States of America or any other nation, or any political subdivision thereof, whether state or local, or any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administration powers or functions of or pertaining to government over any Debtor or any of its subsidiaries, or any of their respective properties, assets or undertakings.

“Instruments” means any “instrument,” as such term is defined in the UCC, and shall include, without limitation, promissory notes, drafts, bills of exchange, trade acceptances, letters of credit, letter of credit rights (as defined in the UCC), and Chattel Paper.

“Inventory” means any “inventory,” as such term is defined in the UCC.

“Investment Property” means any “investment property”, as such term is defined in the UCC.

“Obligations” means all obligations, liabilities and indebtedness of every nature of Debtors from time to time owed or owing under or in respect of this Agreement or any of the other Security Documents or Transaction Documents, as the case may be, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable whether before or after the filing of a bankruptcy, insolvency or similar proceeding under applicable federal, state, foreign or other law and whether or not an allowed claim in any such proceeding.

“Lien” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Motor Vehicles” shall mean motor vehicles, tractors, trailers and other like property, whether or not the title thereto is governed by a certificate of title or ownership.

“Mortgage” has the meaning set forth in Section 2(h).

“Patents ” means any patents and patent applications, including, without limitation, the inventions and improvements described and claimed therein, all inventions subject to the patents and patent applications listed on Schedule IV attached hereto (if any), and the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the foregoing, and all income, royalties, damages and payments now or hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.

“Permitted Indebtedness” has the meaning set forth in the Notes.

“Proceeds” means “proceeds,” as such term is defined in the UCC and, in any event, includes, without limitation, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any person acting under color of Governmental Authority), and (c) any and all other amounts from time to time paid or payable under, in respect of or in connection with any of the Collateral.

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“Purchase Agreement” means that certain Securities Purchase Agreement, dated September 29, 2017, by and between the Company and Secured Party.

“Representative” means any Person acting as agent, representative or trustee on behalf of the Secured Party from time to time.

“Security Documents” means this Agreement and any other documents securing the Liens of the Secured Party hereunder.

“Software” means all “software” as such term is defined in the UCC, now owned or hereafter acquired by a Debtor, other than software embedded in any category of Goods, including, without limitation, all computer programs and all supporting information provided in connection with a transaction related to any program.

“Trademarks” means any trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared or appear, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, the trademarks and applications listed in Schedule V attached hereto (if any) and renewals thereof, and all income, royalties, damages and payments now or hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.

“Transaction Documents” means the Exchange Agreement, the Notes and the Security Documents.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, that to the extent that the Uniform Commercial Code is used to define any term herein and such term is defined differently in different Articles or Divisions of the Uniform Commercial Code, the definition of such term contained in Article or Division 9 shall govern.

Section 2.           Representations, Warranties and Covenants of Debtors . Each Debtor represents and warrants to, and covenants with, the Secured Party as follows:

(a)          Such Debtor has or will have rights in and the power to transfer the Collateral in which it purports to grant a security interest pursuant to Section 3 hereof (subject, with respect to after acquired Collateral, to such Debtor acquiring the same) and no Lien other than Permitted Indebtedness exists or will exist upon such Collateral at any time.

(b)         This Agreement is effective to create in favor of Secured Party a valid security interest in and Lien upon all of such Debtor’s right, title and interest in and to the Collateral upon (i) the filing of appropriate UCC financing statements in the jurisdictions listed on Schedule I attached hereto, (ii) the execution of a deposit account control agreement (iii) filings in the United States Patent and Trademark Office, or United States Copyright Office with respect to Collateral that is Patents and Trademarks, or Copyrights, as the case may be, (iv) the filing of the Mortgages in the jurisdictions listed on Schedule I hereto, (v) the security interest created hereby being noted on each certificate of title evidencing the ownership of any Motor Vehicle in accordance with Section 4.1(d) hereof and (vi) delivery to the Secured Party or its Representative of Instruments duly endorsed by such Debtor or accompanied by appropriate instruments of transfer duly executed by such Debtor with respect to Instruments not constituting Chattel Paper, such security interest will be a duly perfected first priority perfected security interest (subject to Permitted Indebtedness) in all of the Collateral.

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(c)          All of the Equipment, Inventory and Goods owned by such Debtor is located at the places as specified on Schedule I attached hereto. Except as disclosed on Schedule I , none of the Collateral is in the possession of any bailee, warehousemen, processor or consignee. Schedule I discloses such Debtor’s name as of the date hereof as it appears in official filings in the state or province, as applicable, of its incorporation, formation or organization, the type of entity of such Debtor (including corporation, partnership, limited partnership or limited liability company), organizational identification number issued by such Debtor’s state of incorporation, formation or organization (or a statement that no such number has been issued), such Debtor’s state or province, as applicable, of incorporation, formation or organization and the chief place of business, chief executive office and the office where such Debtor keeps its books and records and the states in which such Debtor conducts its business. Such Debtor has only one state or province, as applicable, of incorporation, formation or organization. Such Debtor does not do business and has not done business during the past five (5) years under any trade name or fictitious business name except as disclosed on Schedule II attached hereto.

(d)          Schedules III , IV and V contain complete and accurate lists as of the date hereof of all (i) registered copyrights and applications therefor; (ii) patents and pending applications therefor; (iii) registered trademarks and service marks and applications therefor; and (iv) all unregistered trademarks and service marks that are material to the operations of the business of such Debtor; in each case owned by such Debtor. No Copyrights, Patents or Trademarks listed on Schedules III, IV and V , respectively, if any, have been adjudged invalid or unenforceable or have been canceled, in whole or in part, or are not presently subsisting. Each of such Copyrights, Patents and Trademarks (if any) is valid and enforceable. Such Debtor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of such Copyrights, Patents and Trademarks, identified on Schedules III, IV and V , as applicable, as being owned by such Debtor, free and clear of any liens, charges and encumbrances, including without limitation licenses, shop rights and covenants by such Debtor not to sue third persons. Such Debtor has adopted, used and is currently using, or has a current bona fide intention to use, all of such Trademarks. Such Debtor has no notice of any suits or actions commenced or threatened with reference to the Copyrights, Patents or Trademarks owned by it.

(e)         Each Debtor agrees to deliver to the Secured Party an updated Schedule I, II, III, IV and/or V within five (5) Business Days of any change thereto.

(f)          All depositary and other accounts including, without limitation, Deposit Accounts, securities accounts, brokerage accounts and other similar accounts, maintained by each Debtor are described on Schedule VI hereto, which description includes for each such account the name of the Debtor maintaining such account, the name, address and telephone and telecopy numbers of the financial institution at which such account is maintained, the account number and the account officer, if any, of such account. No Debtor shall open any new Deposit Accounts, securities accounts, brokerage accounts or other accounts unless such Debtor shall have given Secured Party ten (10) Business Days’ prior written notice of its intention to open any such new accounts. Each Debtor shall deliver to Secured Party a revised version of Schedule VI showing any changes thereto within five (5) Business Days of any such change. Each Debtor hereby authorizes the financial institutions at which such Debtor maintains an account to provide Secured Party with such information with respect to such account as Secured Party from time to time reasonably may request, and each Debtor hereby consents to such information being provided to Secured Party. In addition, all of such Debtor’s depositary, security, brokerage and other accounts including, without limitation, Deposit Accounts shall be subject to the provisions of Section 4.5 hereof.

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(g)         Such Debtor does not own any Commercial Tort Claim except for those disclosed on Schedule VII hereto (if any).

(h)         Such Debtor does not have any interest in real property with respect to real property except as disclosed on Schedule VIII (if any). Each Debtor shall deliver to Secured Party a revised version of Schedule VIII showing any changes thereto within ten (10) Business Days of any such change. Except as otherwise agreed to by Secured Party, all such interests in real property with respect to such real property are subject to a mortgage and deed of trust (in form and substance satisfactory to Secured Party) in favor of Secured Party (hereinafter, a “Mortgage”).

(i)          Each Debtor shall duly and properly record each interest in real property held by such Debtor except with respect to easements, rights of way, access agreements, surface damage agreements, surface use agreements or similar agreements that such Debtor, using prudent customs and practices in the industry in which it operates, does not believe are of material value or material to the operation of such Debtor’s business or, with respect to state and federal rights of way, are not capable of being recorded as a matter of state and federal law.

(j)          All Equipment (including, without limitation, Motor Vehicles) owned by a Debtor and subject to a certificate of title or ownership statute is described on Schedule IX hereto.

Section 3.           Collateral . As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Obligations, each Debtor hereby pledges and grants to the Secured Party a Lien on and security interest in and to all of such Debtor’s right, title and interest in the following properties and assets of such Debtor, whether now owned by such Debtor or hereafter acquired and whether now existing or hereafter coming into existence and wherever located (all being collectively referred to herein as “Collateral”):

(a)          all Instruments, together with all payments thereon or thereunder:

(b)         all Accounts;

(c)         all Inventory;

(d)         all General Intangibles (including payment intangibles (as defined in the UCC) and Software);

(e)         all Equipment;

(f)          all Documents;

(g)         all Contracts;

(h)         all Goods; 

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(i)          all Investment Property, including without limitation all equity interests now owned or hereafter acquired by such Debtor;

(j)          all Deposit Accounts, including, without limitation, the balance from time to time in all bank accounts maintained by such Debtor;

(k)         all Commercial Tort Claims specified on Schedule VII ;

(l)          all Trademarks, Patents and Copyrights;

(m)        all books and records pertaining to the other Collateral; and

(n)         all other tangible and intangible property of such Debtor, including, without limitation, all interests in real property, Proceeds, tort claims, products, accessions, rents, profits, income, benefits, substitutions, additions and replacements of and to any of the property of such Debtor described in the preceding clauses of this Section 3 (including, without limitation, any proceeds of insurance thereon, insurance claims and all rights, claims and benefits against any Person relating thereto), other rights to payments not otherwise included in the foregoing, and all books, correspondence, files, records, invoices and other papers, including without limitation all tapes, cards, computer runs, computer programs, computer files and other papers, documents and records in the possession or under the control of such Debtor, any computer bureau or service company from time to time acting for such Debtor.

Notwithstanding anything to the contrary contained herein or in any Transaction Document, in no event shall the security interest granted herein or therein attach to any Excluded Assets.

Section 4.          Covenants; Remedies . In furtherance of the grant of the pledge and security interest pursuant to Section 3 hereof, each Debtor hereby agrees with the Secured Party as follows:

4.1       Delivery and Other Perfection; Maintenance, etc.

(a)        Delivery of Instruments, Documents, Etc. .. Each Debtor shall deliver and pledge to the Secured Party or its Representative any and all Instruments, negotiable Documents, Chattel Paper and certificated securities (accompanied by stock powers executed in blank, which stock powers may be filled in and completed at any time upon the occurrence of any Event of Default) duly endorsed and/or accompanied by such instruments of assignment and transfer executed by such Debtor in such form and substance as the Secured Party or its Representative may request; provided , that so long as no Event of Default shall have occurred and be continuing, each Debtor may retain for collection in the ordinary course of business any Instruments, negotiable Documents and Chattel Paper received by such Debtor in the ordinary course of business, and the Secured Party or its Representative shall, promptly upon request of a Debtor, make appropriate arrangements for making any other Instruments, negotiable Documents and Chattel Paper pledged by such Debtor available to such Debtor for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by the Secured Party or its Representative, against a trust receipt or like document). If a Debtor retains possession of any Chattel Paper, negotiable Documents or Instruments pursuant to the terms hereof, such Chattel Paper, negotiable Documents and Instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the security interest of GPB Debt Holdings II LLC, in its capacity as Collateral Agent for the benefit of the Purchaser, as secured party.”

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(b)        Other Documents and Actions . Subject to the rights of holders of permitted Liens, each Debtor shall give, execute, deliver, file and/or record any financing statement, registration, notice, instrument, document, agreement, Mortgage or other papers that may be necessary or desirable (in the reasonable judgment of the Secured Party or its Representative) to create, preserve, perfect or validate the security interest granted pursuant hereto (or any security interest or mortgage contemplated or required hereunder, including with respect to Section 2(h) of this Agreement) or to enable the Secured Party or its Representative to exercise and enforce the rights of the Secured Party hereunder with respect to such pledge and security interest, provided that notices to account debtors in respect of any Accounts or Instruments shall be subject to the provisions of clause (e) below. Notwithstanding the foregoing each Debtor hereby irrevocably authorizes the Secured Party at any time and from time to time to file in any filing office in any jurisdiction any initial financing statements (and other similar filings or registrations under other applicable laws and regulations pertaining to the creation, attachment, or perfection of security interests) and amendments thereto that (a) indicate the Collateral (i) as all assets of such Debtor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether such Debtor is an organization, the type of organization and any organization identification number issued to such Debtor, and (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of real property to which the Collateral relates. Each Debtor agrees to furnish any such information to the Secured Party promptly upon request. Each Debtor also ratifies its authorization for the Secured Party to have filed in any jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.

(c)        Books and Records . Each Debtor (or a Company on behalf of a Debtor) shall maintain at its own cost and expense complete and accurate books and records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral. Upon the occurrence and during the continuation of any Event of Default, each Debtor shall deliver and turn over any such books and records (or true and correct copies thereof) to the Secured Party or its Representative at any time on demand. Each Debtor shall permit any Representative of the Secured Party to inspect such books and records at any time during reasonable business hours and will provide photocopies thereof at such Debtor’s expense to the Secured Party upon request of the Secured Party.

(d)        Motor Vehicles . Each Debtor shall, promptly upon acquiring same, cause the Secured Party to be listed as the lienholder on each certificate of title or ownership covering any items of Equipment, including Motor Vehicles, having a value in excess of $50,000 individually or in the aggregate for all such items of Equipment of the Debtor, or otherwise comply with the certificate of title or ownership laws of the relevant jurisdiction issuing such certificate of title or ownership in order to properly evidence and perfect Secured Party’s security interest in the assets represented by such certificate of title or ownership. 

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(e)        Notice to Account Debtors; Verification .. (i) Subject to the rights of holders of Permitted Liens, upon the occurrence and during the continuance of any Event of Default or if any rights of set-off (other than set-offs against an Account arising under the Contract giving rise to the same Account) or contra accounts may be asserted, upon request of the Secured Party or its Representative, each Debtor shall promptly notify (and each Debtor hereby authorizes the Secured Party and its Representative so to notify) each account debtor in respect of any Accounts or Instruments or other Persons obligated on the Collateral that such Collateral has been assigned to the Secured Party hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to the Secured Party, and (ii) the Secured Party and its Representative shall have the right at any time or times to make direct verification with the account debtors or other Persons obligated on the Collateral of any and all of the Accounts or other such Collateral.

(f)        Intellectual Property . If such Debtor shall (i) obtain rights to any new patentable inventions, any registered Copyrights or any Patents or Trademarks, or (ii) become entitled to the benefit of any registered Copyrights or any Patents or any registered Trademarks or unregistered Trademarks material to the operations of the business of such Debtor or any improvement on any Patent, the provisions of this Agreement above shall automatically apply thereto and such Debtor shall give to Secured Party prompt written notice thereof. Each Debtor hereby authorizes Secured Party to modify this Agreement by amending Schedules III, IV and V , as applicable, to include any such registered Copyrights or any such Patents and Trademarks. Each Debtor shall have the duty (i) to prosecute diligently any patent, trademark, or service mark applications pending as of the date hereof or hereafter, (ii) to preserve and maintain all rights in the Copyrights, Patents and Trademarks, to the extent material to the operations of the business of such Debtor and (iii) to ensure that the Copyrights, Patents and Trademarks are and remain enforceable, to the extent material to the operations of the business of such Debtor. Any expenses incurred in connection with such Debtor’s obligations under this Section 4.1(f) shall be borne by such Debtor. Except for any such items that a Debtor reasonably believes (using prudent industry customs and practices) are no longer necessary for the on-going operations of its business, no Debtor shall abandon any material right to file a patent, trademark or service mark application, or abandon any pending patent, trademark or service mark application or any other Copyright, Patent or Trademark without the prior written consent of Secured Party, which consent shall not be unreasonably withheld.

(g)        Further Identification of Collateral . Each Debtor will, when and as often as requested by the Secured Party or its Representative, furnish to the Secured Party or such Representative, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party or its Representative may reasonably request, all in reasonable detail.

(h)        Investment Property . Each Debtor will take any and all actions required or reasonably requested by the Secured Party, from time to time, to (i) cause the Secured Party to obtain exclusive control of any Investment Property owned by such Debtor in a manner acceptable to the Secured Party and (ii) obtain from any issuers of Investment Property and such other Persons, for the benefit of the Secured Party, written confirmation of the Secured Party’s control over such Investment Property. For purposes of this Section 4.1(h), the Secured Party shall have exclusive control of Investment Property if (i) such Investment Property consists of certificated securities and a Debtor delivers such certificated securities to the Secured Party (with appropriate endorsements if such certificated securities are in registered form); (ii) such Investment Property consists of uncertificated securities and either (x) a Debtor delivers such uncertificated securities to the Secured Party or (y) the issuer thereof agrees, pursuant to documentation in form and substance satisfactory to the Secured Party, that it will comply with instructions originated by the Secured Party without further consent by such Debtor, and (iii) such Investment Property consists of security entitlements and either (x) the Secured Party becomes the entitlement holder thereof or (y) the appropriate securities intermediary agrees, pursuant to the documentation in form and substance satisfactory to the Secured Party, that it will comply with entitlement orders originated by the Secured Party without further consent by any Debtor.

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(i)          Commercial Tort Claims . Each Debtor shall promptly notify Secured Party of any Commercial Tort Claim acquired by it that concerns a claim in excess of $50,000 and unless otherwise consented to by Secured Party, such Debtor shall enter into a supplement to this Agreement granting to Secured Party a Lien on and security interest in such Commercial Tort Claim.

4.2       Other Liens . Debtors will not create, permit or suffer to exist, and will defend the Collateral against and take such other action as is necessary to remove, any Lien on the Collateral except Permitted Liens , and will defend the right, title and interest of the Secured Party in and to the Collateral and in and to all Proceeds thereof against the claims and demands of all Persons whatsoever , except holders of Permitted Liens .

4.3       Preservation of Rights . Whether or not any Event of Default has occurred or is continuing, the Secured Party and its Representative may, but shall not be required to, take any steps the Secured Party or its Representative deems necessary or appropriate to preserve any Collateral or any rights against third parties to any of the Collateral, including obtaining insurance for the Collateral at any time when such Debtor has failed to do so, and Debtors shall promptly pay, or reimburse the Secured Party for, all expenses incurred in connection therewith.

4.4       Formation of Subsidiaries; Name Change; Location; Bailees.

(a)        No Debtor shall form or acquire any subsidiary unless (i) such Debtor pledges all of the stock or equity interests of such subsidiary to the Secured Party pursuant to an agreement in a form agreed to by the Secured Party, (ii) such subsidiary becomes a party to this Agreement and all other applicable Security Documents and (iii) the formation or acquisition of such Subsidiary is not prohibited by the terms of the Transaction Documents.

(b)        No Debtor shall (i) reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof, or (ii) otherwise change its name, identity or corporate structure, in each case, without the prior written consent of Secured Party, which consent shall not be unreasonably withheld. Each Debtor will notify Secured Party promptly in writing prior to any such change in the proposed use by such Debtor of any tradename or fictitious business name other than any such name set forth on Schedule II attached hereto.

(c)        Except for the sale of Inventory in the ordinary course of business, each Debtor will keep the Collateral at the locations specified in Schedule I . Each Debtor will give Secured Party thirty (30) day’s prior written notice of any change in such Debtor’s chief place of business or of any new location for any of the Collateral.

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(d)        If any Collateral is at any time in the possession or control of any warehousemen, bailee, consignee or processor, such Debtor shall, upon the request of Secured Party or its Representative, notify such warehousemen, bailee, consignee or processor of the Lien and security interest created hereby and shall instruct such Person to hold all such Collateral for Secured Party’s account subject to Secured Party’s instructions.

(e)        Each Debtor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement relating to Secured Party’s security interests hereunder without the prior written consent of Secured Party and agrees that it will not do so without the prior written consent of Secured Party, subject to such Debtor’s rights under Section 9-509(d)(2) to the UCC.

(f)         Subject to the rights of holders of Permitted Liens, no Debtor shall enter into any Contract that restricts or prohibits the grant to Secured Party of a security interest in Accounts, Chattel Paper, Instruments or payment intangibles or the proceeds of the foregoing.

4.5       Events of Default, Etc. . During the period during which an Event of Default shall have occurred and be continuing, subject to the rights of holders of Permitted Liens :

(a)        each Debtor shall, at the request of the Secured Party or its Representative, assemble the Collateral and make it available to Secured Party or its Representative at a place or places designated by the Secured Party or its Representative which are reasonably convenient to Secured Party or its Representative, as applicable, and such Debtor;

(b)        the Secured Party or its Representative may make any reasonable compromise or settlement deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Collateral;

(c)        the Secured Party shall have all of the rights and remedies with respect to the Collateral of a secured party under the UCC (whether or not said UCC is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including, without limitation, the right, to the maximum extent permitted by law, to: (i) exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Secured Party were the sole and absolute owner thereof (and each Debtor agrees to take all such action as may be appropriate to give effect to such right) and (ii) to the appointment of a receiver or receivers for all or any part of the Collateral or business of a Debtor, whether such receivership be incident to a proposed sale or sales of such Collateral or otherwise and without regard to the value of the Collateral or the solvency of any person or persons liable for the payment of the Obligations secured by such Collateral. Each Debtor hereby consents to the appointment of such receiver or receivers, waives any and all defenses to such appointment and agrees that such appointment shall in no manner impair, prejudice or otherwise affect the rights of Secured Party under this Agreement. Each Debtor hereby expressly waives notice of a hearing for appointment of a receiver and the necessity for bond or an accounting by the receiver;

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(d)        the Secured Party or its Representative in its discretion may, in the name of the Secured Party or in the name of a Debtor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so;

(e)        the Secured Party or its Representative may take immediate possession and occupancy of any premises owned, used or leased by a Debtor and exercise all other rights and remedies which may be available to the Secured Party;

(f)         the Secured Party may, upon reasonable notice (such reasonable notice to be determined by Secured Party in its sole and absolute discretion, which shall not be less than ten (10) days), with respect to the Collateral or any part thereof which shall then be or shall thereafter come into the possession, custody or control of the Secured Party or its Representative, sell, lease, license, assign or otherwise dispose of all or any part of such Collateral, at such place or places as the Secured Party deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required above or by applicable statute and cannot be waived), and the Secured Party or anyone else may be the purchaser, lessee, licensee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of Debtors, any such demand, notice and right or equity being hereby expressly waived and released. The Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned;

(g)        the rights, remedies and powers conferred by this Section 4.5 are in addition to, and not in substitution for, any other rights, remedies or powers that the Secured Party may have under any Transaction Document, at law, in equity or by or under the UCC or any other statute or agreement. The Secured Party may proceed by way of any action, suit or other proceeding at law or in equity and no right, remedy or power of the Secured Party will be exclusive of or dependent on any other. The Secured Party may exercise any of its rights, remedies or powers separately or in combination and at any time; and

(h)        each Debtor, Secured Party and each Debtor’s bank shall enter into a deposit account control agreement in form and substance satisfactory to Secured Party that is sufficient to give Secured Party “control” (for purposes of Articles 8 and 9 of the Uniform Commercial Code) over such account and which directs such bank to transfer such funds so deposited on a daily basis, or at other times acceptable to Secured Party, to Secured Party, either to any account maintained by Secured Party at said bank or by wire transfer to appropriate account(s) at Secured Party. All funds deposited in such Deposit Accounts shall immediately become subject to the security interest of Secured Party for its own benefit, and Secured Party shall obtain the agreement by such bank to waive any offset rights against the funds so deposited. Secured Party shall apply all funds received by it from the Deposit Accounts to the satisfaction of the Obligations.

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The proceeds of each collection, sale or other disposition under this Section 4.5 shall be applied in accordance with Section 4.8 hereof.

4.6       Deficiency . If the proceeds of sale, collection or other realization of or upon the Collateral are insufficient to cover the costs and expenses of such realization and the payment in full of the Obligations, Debtors shall remain jointly and severally liable for any deficiency.

4.7       Private Sale . Each Debtor recognizes that the Secured Party may be unable to effect a public sale of any or all of the Collateral consisting of securities by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the “Act”), and applicable state securities laws, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Collateral for their own account for investment and not with a view to the distribution or resale thereof. Each Debtor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and each Debtor agrees that it is not commercially unreasonable for Secured Party to engage in any such private sales or dispositions under such circumstances. The Secured Party shall be under no obligation to delay a sale of any of the Collateral to permit a Debtor to register such Collateral for public sale under the Act, or under applicable state securities laws, even if Debtors would agree to do so. The Secured Party shall not incur any liability as a result of the sale of any such Collateral, or any part thereof, at any private sale provided for in this Agreement conducted in a commercially reasonable manner, and so long as Secured Party conducts such sale in a commercially reasonable manner each Debtor hereby waives any claims against the Secured Party arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if the Secured Party accepts the first offer received and does not offer the Collateral to more than one offeree.

Each Debtor further agrees to do or cause to be done all such other acts and things as may be necessary to make such sale or sales of any portion or all of any such Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at such Debtor’s expense. Each Debtor further agrees that a breach of any of the covenants contained in this Section 4.7 will cause irreparable injury to the Secured Party, that the Secured Party has no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 4.7 shall be specifically enforceable against Debtors, and each Debtor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing.

4.8       Application of Proceeds . The proceeds of any collection, sale or other realization of all or any part of the Collateral, and any other cash at the time held by the Secured Party under this Agreement, shall be applied to the Obligations in such order as Secured Party shall elect.

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4.9       Attorney-in-Fact . Each Debtor hereby irrevocably constitutes and appoints the Secured Party, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Debtor and in the name of such Debtor or in its own name, from time to time in the discretion of the Secured Party, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute and deliver any and all documents and instruments which may be necessary or desirable to perfect or protect any security interest granted hereunder, to maintain the perfection or priority of any security interest granted hereunder, or to otherwise accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, hereby gives the Secured Party the power and right, on behalf of such Debtor, without notice to or assent by such Debtor (to the extent permitted by applicable law), subject to the rights of holders of Permitted Liens , to do the following:

(a)        to take any and all appropriate action and to execute and deliver any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement;

(b)        upon the occurrence and during the continuation of an Event of Default, to ask, demand, collect, receive and give acquittance and receipts for any and all moneys due and to become due under any Collateral and, in the name of such Debtor or its own name or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other Instruments for the payment of moneys due under any Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Secured Party for the purpose of collecting any and all such moneys due under any Collateral whenever payable and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Secured Party for the purpose of collecting any and all such moneys due under any Collateral whenever payable;

(c)        to pay or discharge charges or liens levied or placed on or threatened against the Collateral, to effect any insurance called for by the terms of this Agreement and to pay all or any part of the premiums therefor;

(d)        to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due, and to become due thereunder, directly to the Secured Party or as the Secured Party shall direct, and to receive payment of and receipt for any and all moneys, claims and other amounts due, and to become due at any time, in respect of or arising out of any Collateral;

(e)        upon the occurrence and during the continuation of an Event of Default, to sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts and other Documents constituting or relating to the Collateral;

(f)         upon the occurrence and during the continuation of an Event of Default, to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral;

(g)        upon the occurrence and during the continuation of an Event of Default, to defend any suit, action or proceeding brought against a Debtor with respect to any Collateral;

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(h)        upon the occurrence and during the continuation of an Event of Default, to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Secured Party may deem appropriate;

(i)         to the extent that a Debtor’s authorization given in Section 4.1(b) of this Agreement is not sufficient to file such financing statements with respect to this Agreement, with or without such Debtor’s signature, or to file a photocopy of this Agreement in substitution for a financing statement, as the Secured Party may deem appropriate and to execute in such Debtor’s name such financing statements and amendments thereto and continuation statements which may require such Debtor’s signature;

(j)         upon the occurrence and during the continuation of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Party were the absolute owners thereof for all purposes; and

(k)        to do, at the Secured Party’s option and at such Debtor’s expense, at any time, or from time to time, all acts and things which the Secured Party reasonably deems necessary to protect or preserve or, upon the occurrence and during the continuation of an Event of Default, realize upon the Collateral and the Secured Party’s lien therein, in order to effect the intent of this Agreement, all as fully and effectively as such Debtor might do.

Each Debtor hereby ratifies, to the extent permitted by law, all that such attorneys lawfully do or cause to be done by virtue hereof provided the same is performed in a commercially reasonable manner. The power of attorney granted hereunder is a power coupled with an interest and shall be irrevocable until the Obligations are indefeasibly paid in full in cash and this Agreement is terminated in accordance with Section 4.11 hereof.

Each Debtor also authorizes the Secured Party, at any time from and after the occurrence and during the continuation of any Event of Default, (x) to communicate in its own name with any party to any Contract with regard to the assignment of the right, title and interest of such Debtor in and under the Contracts hereunder and other matters relating thereto and (y) to execute, in connection with any sale of Collateral provided for in Section 4.5 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.

4.10     Perfection . Prior to or concurrently with the execution and delivery of this Agreement, each Debtor shall:

(a)        file such financing statements, assignments for security and other documents in such offices as may be necessary or as the Secured Party or the Representative may request to perfect the security interests granted by Section 3 of this Agreement;

(b)        at Secured Party’s request, deliver to the Secured Party or its Representative the originals of all Instruments together with, in the case of Instruments constituting promissory notes, allonges attached thereto showing such promissory notes to be payable to the order of a blank payee;

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(c)        deliver to the Secured Party or its Representative the originals of all Motor Vehicle Titles, duly endorsed indicating the Secured Party’s interest therein as a lienholder, together with such other documents as may be required consistent with Section 4.1(d) hereof to perfect the security interest granted by Section 3 in all such Motor Vehicles (if any).

4.11     Termination; Partial Release of Collateral . This Agreement and the Liens and security interests granted hereunder shall not terminate until the termination or satisfaction in full of the Notes and the full and complete performance and indefeasible satisfaction of all the Obligations (i) in respect of the Transaction Documents (including, without limitation, the indefeasible payment in full in cash of all such Obligations) and (ii) with respect to which claims have been asserted by the Collateral Agent and/or Purchaser, whereupon the Secured Party shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral to or on the order of Debtors. The Secured Party shall also execute and deliver to Debtors upon such termination and at Debtors’ expense such UCC termination statements, certificates for terminating the liens on the Motor Vehicles (if any) and such other documentation as shall be reasonably requested by Debtors to effect the termination and release of the Liens and security interests in favor of the Secured Party affecting the Collateral.

4.12     Further Assurances . At any time and from time to time, upon the written request of the Secured Party or its Representative, and at the sole expense of Debtors, subject to the rights of holders of Permitted Liens , Debtors will promptly and duly execute and deliver any and all such further instruments, documents and agreements and take such further actions as the Secured Party or its Representative may reasonably require in order for the Secured Party to obtain the full benefits of this Agreement and of the rights and powers herein granted in favor of the Secured Party, including, without limitation, using Debtors’ best efforts to secure all consents and approvals necessary or appropriate for the assignment to the Secured Party of any Collateral held by Debtors or in which a Debtor has any rights not heretofore assigned, the filing of any financing or continuation statements under the UCC with respect to the liens and security interests granted hereby, transferring Collateral to the Secured Party’s possession (if a security interest in such Collateral can be perfected by possession), placing the interest of the Secured Party as lienholder on the certificate of title of any Motor Vehicle, and obtaining waivers of liens from landlords and mortgagees. Each Debtor also hereby authorizes the Secured Party and its Representative to file any such financing or continuation statement without the signature of such Debtor to the extent permitted by applicable law.

4.13     Limitation on Duty of Secured Party . The powers conferred on the Secured Party under this Agreement are solely to protect the Secured Party’s interest in the Collateral and shall not impose any duty upon it to exercise any such powers. The Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers , and neither the Secured Party nor its Representative nor any of their respective officers, directors, employees or agents shall be responsible to Debtors for any act or failure to act, except for gross negligence or willful misconduct. Without limiting the foregoing, the Secured Party and any Representative shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in their possession if such Collateral is accorded treatment substantially equivalent to that which the relevant Secured Party or any Representative, in its individual capacity, accords its own property consisting of the type of Collateral involved, it being understood and agreed that neither the Secured Party nor any Representative shall have any responsibility for taking any necessary steps (other than steps taken in accordance with the standard of care set forth above) to preserve rights against any Person with respect to any Collateral.

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Also without limiting the generality of the foregoing, neither the Secured Party nor any Representative shall have any obligation or liability under any Contract or license by reason of or arising out of this Agreement or the granting to the Secured Party of a security interest therein or assignment thereof or the receipt by the Secured Party or any Representative of any payment relating to any Contract or license pursuant hereto, nor shall the Secured Party or any Representative be required or obligated in any manner to perform or fulfill any of the obligations of Debtors under or pursuant to any Contract or license, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any Contract or license, or to present or file any claim, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

Section 5.           Miscellaneous .

5.1       No Waiver . No failure on the part of the Secured Party or any of its Representatives to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Secured Party or any of its Representatives of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently and are not exclusive of any rights and remedies provided by law.

5.2       Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

5.3       Notices . All notices, approvals, requests, demands and other communications hereunder shall be delivered or made in the manner set forth in, and shall be effective in accordance with the terms of, the Purchase Agreement; provided, that, to the extent any such communication is being made or sent to a Debtor that is not the Company, such communication shall be effective as to such Debtor if made or sent to any Company in accordance with the foregoing. Debtors and Secured Party may change their respective notice addresses by written notice given to each other party five (5) days prior to the effectiveness of such change.

5.4       Amendments, Etc. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Debtor sought to be charged or benefited thereby and the Secured Party. Any such amendment or waiver shall be binding upon the Secured Party and the Debtor sought to be charged or benefited thereby and their respective successors and assigns.

5.5       Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of each of the parties hereto, provided, that no Debtor shall assign or transfer its rights hereunder without the prior written consent of the Secured Party. Secured Party may assign its rights hereunder without the consent of Debtors, in which event such assignee shall be deemed to be Secured Party hereunder with respect to such assigned rights; provided, so long as no Event of Default has occurred and is continuing, the Secured Party shall not assign any of its rights hereunder to a competitor of any Company.

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5.6       Counterparts; Headings . This Agreement may be authenticated in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may authenticate this Agreement by signing any such counterpart. This Agreement may be authenticated by manual signature or facsimile, .pdf or similar electronic signature, all of which shall be equally valid. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.

5.7       Severability . If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Secured Party and its Representative in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

5.8       SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS . EACH DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND EACH DEBTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF SECURED PARTY TO BRING PROCEEDINGS AGAINST ANY DEBTOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY A DEBTOR AGAINST SECURED PARTY OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK (AND SECURED PARTY HEREBY SUBMITS TO THE JURISDICTION OF SUCH COURT). NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT OF SECURED PARTY TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.

5.9       WAIVER OF RIGHT TO TRIAL BY JURY . EACH DEBTOR AND SECURED PARTY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH DEBTOR AND SECURED PARTY AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION 5.9 AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

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5.10     Joint and Several . The obligations, covenants and agreements of Debtors hereunder shall be the joint and several obligations, covenants and agreements of each Debtor, whether or not specifically stated herein without preferences or distinction among them.

5.11     Concerning Collateral Agent . Collateral Agent shall act in accordance with the terms of this Agreement and the other Security Documents and Transaction Documents. The Collateral Agent may exercise or refrain from exercising any rights (including making demands and giving notices) and take or refrain from taking any action, in accordance with this Agreement and the other Security Documents and Transaction Documents. The Collateral Agent may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Collateral Agent may resign and a successor Collateral Agent may be appointed by the Purchaser. On the acceptance of appointment as the successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Collateral Agent’s resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Agent.

5.12     No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

5.13     ENTIRE AGREEMENT; AMENDMENT . THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, SUPERSEDES ALL OTHER PRIOR ORAL OR WRITTEN AGREEMENTS BETWEEN SECURED PARTY, THE DEBTORS, THEIR AFFILIATES AND PERSONS ACTING ON THEIR BEHALF WITH RESPECT TO THE MATTERS DISCUSSED HEREIN, AND THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS AND THE OTHER INSTRUMENTS REFERENCED HEREIN AND THEREIN, CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE MATTERS COVERED HEREIN AND THEREIN AND, EXCEPT AS SPECIFICALLY SET FORTH HEREIN OR THEREIN, NEITHER THE SECURED PARTY NOR ANY DEBTOR MAKES ANY REPRESENTATION, WARRANTY, COVENANT OR UNDERTAKING WITH RESPECT TO SUCH MATTERS. AS OF THE DATE OF THIS AGREEMENT, THERE ARE NO UNWRITTEN AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS DISCUSSED HEREIN. NO PROVISION OF THIS AGREEMENT MAY BE AMENDED, MODIFIED OR SUPPLEMENTED OTHER THAN BY AN INSTRUMENT IN WRITING SIGNED BY THE DEBTORS AND THE SECURED PARTY.

[ Remainder of Page Intentionally Left Blank; Signature Page Follows ]

19 

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the day and year first above written. 

DEBTOR:
HEALTH-RIGHT DISCOVERIES, INC. , a Florida corporation
By:	/s/ David Hopkins
	Name: David Hopkins Title: President

SECURED PARTY:
GPB DEBT HOLDINGS II LLC
By:	/s/ David Gentile

 Name:  David Gentile

 Title: Manager

Notice Address:
	GPB Debt Holdings II, LLC
	535 W 24th Street, 6th Floor
	New York, NY, 10011

EXHIBIT A

Form of Joinder

Joinder to Security Agreement

The undersigned, ______________________________, hereby joins in the execution of that certain Amended and Restated Security Agreement dated as of November 1, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”) by Health-Right Discoveries, Inc., a Florida corporation, GPB Debt Holdings II LLC, a limited liability company, and each other Person that becomes a Debtor or a Secured Party (as defined therein) thereunder after the date thereof and hereof and pursuant to the terms thereof, to and in favor of the Secured Party. By executing this Joinder, the undersigned hereby agrees that it is a Debtor thereunder and agrees to be bound by all of the terms and provisions of the Security Agreement. The undersigned represents and warrants that the representations and warranties set forth in the Security Agreement are, with respect to the undersigned, true and correct as of the date hereof.

The undersigned represents and warrants to Secured Party that:

(a)      all of the Equipment, Inventory and Goods owned by such Debtor is located at the places as specified on Schedule I and such Debtor conducts business in the jurisdiction set forth on Schedule I ;

(b)      except as disclosed on Schedule I , none of such Collateral is in the possession of any bailee, warehousemen, processor or consignee;

(c)      the chief place of business, chief executive office and the office where such Debtor keeps its books and records are located at the place specified on Schedule I ;

(d)      such Debtor (including any Person acquired by such Debtor) does not do business or has not done business during the past five years under any tradename or fictitious business name, except as disclosed on Schedule II ;

(e)      all Copyrights, Patents and Trademarks owned or licensed by the undersigned are listed in Schedules III , IV and V , respectively;

(f)       all Deposit Accounts, securities accounts, brokerage accounts and other similar accounts maintained by such Debtor, and the financial institutions at which such accounts are maintained, are listed on Schedule VI ;

(g)      all Commercial Tort Claims of such Debtor are listed on Schedule VII ;

(h)      all interests in real property and mining rights held by such Debtor are listed on Schedule VIII ;

(i)       all Equipment (including Motor Vehicles) owned by such debtor are listed on Schedule IX .

	, a
By:
Title:
FEIN:

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David Hopkins, Chief Executive Officer and Chief Financial Officer of Health-Right Discoveries, Inc., a Florida corporation (the “Registrant”), certify that:

1. I have reviewed this Form 10-Q for the quarter ended September 30, 2020 of the Registrant;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. I, as the Registrant’s sole executive officer, am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. I, as the Registrant’s sole officer, have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  November 18, 2020	HEALTH-RIGHT DISCOVERIES, INC.
	By:	/s/ David Hopkins
		David Hopkins, President and Chief Executive
		Officer (Principal Executive, Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER 

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED 

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Health-Right Discoveries Inc., a Florida corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Hopkins, the Chief Executive Officer and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 18, 2020
	HEALTH-RIGHT DISCOVERIES, INC.
	By:	/s/ David Hopkins
		President and Chief Executive Officer
		(Principal Executive, Financial and Accounting Officer)

XML

Cover - shares	9 Months Ended
	Sep. 30, 2020	Nov. 17, 2020
Cover [Abstract]
Entity Registrant Name	Health-Right Discoveries, Inc.
Entity Central Index Key	0001537663
Document Type	10-Q
Document Period End Date	Sep. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Incorporation, State or Country Code	FL
Entity File Number	333-206839
Entity Interactive Data Current	Yes
Entity Reporting Status Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		22,869,191
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
CURRENT ASSETS:
Cash	$ 1,769,460	$ 2,242,013
Accounts receivable, net	66,858	52,281
Inventories	31,042	10,735
Prepaid and other assets	3,530	14,433
Total Current Assets	1,870,890	2,319,462
Property and equipment, net	20,129	23,871
Deferred tax asset	89,171
Right of use asset		25,001
Intangible assets, net	1,955,887	2,230,122
Goodwill	3,313,226	3,313,226
TOTAL ASSETS	7,249,303	7,911,682
CURRENT LIABILITIES:
Accounts payable and accrued expenses	1,572,324	1,388,505
Current portion of right of use liability		8,040
Current portion - notes payable - PPP loans	71,936
Current portion - notes payable	2,500,000	2,500,000
Current portion - notes payable, net of discounts of $-0- and $123,336 as of September 30, 2020 and December 31, 2019, respectively	5,834,508	5,181,164
Total Current Liabilities	9,978,768	9,077,709
LONG-TERM LIABILITIES:
Right of use liability, net of current portion		16,784
Notes payable - PPP loans, net of current portion	45,777
Deferred tax liability		364,882
Total Long-term Liabilities	45,777	381,666
Total Liabilities	10,024,545	9,459,375
STOCKHOLDERS' DEFICIENCY
Preferred Stock, .001 par value, 5,000,000 shares authorized No shares issued and outstanding September 30, 2020 and December 31, 2019, respectively
Common Stock, .001 par value, 100,000,000 shares authorized 22,869,191 shares issued and outstanding September 30, 2020 and December 31, 2019, respectively	22,869	22,869
Additional Paid in Capital	1,117,967	1,117,967
Accumulated Deficit	(3,916,078)	(2,688,529)
Total Stockholders' Deficiency	(2,775,242)	(1,547,693)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY	$ 7,249,303	$ 7,911,682

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Notes payable, related party discounts current	$ 0	$ 123,336
Preferred Stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred Stock, authorized	5,000,000	5,000,000
Preferred Stock, issued	0	0
Preferred Stock, outstanding	0	0
Common Stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common Stock, authorized	100,000,000	100,000,000
Common Stock, issued	22,869,191	22,869,191
Common Stock, outstanding	22,869,191	22,869,191

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Revenue	$ 343,492	$ 828,302	$ 1,099,213	$ 2,789,562
Cost of Revenue	64,547	127,661	174,458	431,102
Gross Profit	278,945	700,641	924,755	2,358,460
Operating Expenses
General and administrative	321,308	479,650	1,016,408	1,595,710
Amortization and depreciation	95,556	121,100	286,706	363,356
Impairment loss		1,061,200		1,061,200
Total operating expenses	416,864	1,661,950	1,303,114	3,020,266
Loss from operations	(137,919)	(961,309)	(378,359)	(661,806)
Other Expenses
Interest expenses	434,299	352,419	1,303,243	1,048,710
Total other expenses	434,299	352,419	1,303,243	1,048,710
Loss before income tax benefit	(572,218)	(1,313,728)	(1,681,602)	(1,710,516)
Income tax benefit	154,519	354,707	454,053	461,840
NET LOSS	$ (417,699)	$ (959,021)	$ (1,227,549)	$ (1,248,676)
Loss per common share (in dollars per share)	$ (0.02)	$ (0.04)	$ (0.05)	$ (0.05)
Weighted average common shares outstanding - basic and diluted (in shares)	22,869,191	22,869,191	22,869,191	22,869,191

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (Unaudited) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Common Stock [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance, beginning	$ 22,869	$ 22,869	$ 22,869	$ 22,869	$ 22,869	$ 22,869	$ 22,869	$ 22,869
Balance, beginning (in shares)	22,869,191	22,869,191	22,869,191	22,869,191	22,869,191	22,869,191	22,869,191	22,869,191
Balance, ending	$ 22,869	$ 22,869	$ 22,869	$ 22,869	$ 22,869	$ 22,869	$ 22,869	$ 22,869
Balance, ending (in shares)	22,869,191	22,869,191	22,869,191	22,869,191	22,869,191	22,869,191	22,869,191	22,869,191
Additional Paid-In Capital [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance, beginning	$ 1,117,967	$ 1,117,967	$ 1,117,967	$ 1,117,967	$ 1,117,967	$ 1,117,967	$ 1,117,967	$ 1,117,967
Balance, ending	1,117,967	1,117,967	1,117,967	1,117,967	1,117,967	1,117,967	1,117,967	1,117,967
Accumulated Deficit [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance, beginning	(3,498,379)	(3,099,492)	(2,688,529)	(1,517,520)	(1,260,032)	(1,209,611)	(2,688,529)	(1,209,611)
Adoption of ASU 2016-02						(18,254)
Net loss	(417,699)	(398,887)	(410,963)	(959,021)	(257,488)	(32,167)
Balance, ending	(3,916,078)	(3,498,379)	(3,099,492)	(2,476,541)	(1,517,520)	(1,260,032)	(3,916,078)	(2,476,541)
Balance, beginning	(2,357,543)	(1,958,656)	(1,547,693)	(376,684)	(119,196)	(68,775)	(1,547,693)	(68,775)
Adoption of ASU 2016-02						(18,254)
Net loss	(417,699)	(398,887)	(410,963)	(959,021)	(257,488)	(32,167)	(1,227,549)	(1,248,676)
Balance, ending	$ (2,775,242)	$ (2,357,543)	$ (1,958,656)	$ (1,335,705)	$ (376,684)	$ (119,196)	$ (2,775,242)	$ (1,335,705)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
OPERATING ACTIVITIES:
Net loss	$ (1,227,549)	$ (1,248,676)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense	3,742	5,776
Amortization expense	274,235	348,850
Impairment loss		1,061,200
Right of use liability amortization	177	(2,323)
Non-cash interest	123,336	123,337
Deferred income tax benefit	(454,053)	(461,840)
Changes in operating assets and liabilities:
Accounts receivable	(14,577)	78,671
Inventories	(20,307)	11,211
Prepaid and other assets	10,903	(15,609)
Accounts payable and accrued expenses	713,827	539,663
Accrued salary to related party		(50,000)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	(590,266)	390,260
FINANCING ACTIVITIES:
Proceeds of notes payable	117,713
NET CASH PROVIDED BY FINANCING ACTIVITIES	117,713
(DECREASE) INCREASE IN CASH	(472,553)	390,260
CASH - BEGINNING OF PERIOD	2,242,013	2,149,738
CASH - END OF PERIOD	1,769,460	2,539,998
Noncash investing and financing activities:
Accrued interest converted to note payable	530,008	154,500
Supplemental disclosures of cash flow information:
Cash paid for interest	516,636	499,765
Cash paid for income taxes		$ 80,000

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 1 – Summary of Significant Accounting Policies

Health-Right Discoveries, Inc. (“the Company”) was formed under the laws of the State of Florida on October 12, 2011 under the name Four Plex Partners, Inc. and subsequently changed its name to Health-Right Discoveries, Inc. on March 22, 2012. The Company’s primary business was to develop and market an innovative portfolio of both prescription nutritional, OTC monograph and natural products that primarily focus on factors relating to stress-induced conditions and diseases.

On September 29, 2017, pursuant to a Securities Purchase Agreement dated August 17, 2017, the Company acquired (the “Acquisition”) all the outstanding shares of Common Compounds, Inc., n/k/a CCI Billing, Inc. d/b/a Complete Claim Management (“CCI”) and EZPharmaRx, LLC n/k/a Script Connection, LLC (“SCLLC”). HRD, through its subsidiaries, CCI and SCLLC, along with licensed pharmaceutical wholesalers, offer and provide their respective services to physician practices that desire to prescribe and dispense certain pharmaceutical products and medications in the practice’s office to patients receiving treatment for work-related injuries (“In-Office Dispensing Program”).

CCI offers and provides administrative services and billing services to physician practices (each a “Practice” and collectively, the “Practices”) desiring to make certain over-the-counter products, including non-narcotic topical medications, (“OTC Products”), and certain prescription medications (“Prescription Medications”) available to patients in the physician practice’s office. Each participating Practice is responsible for obtaining and maintaining any necessary and appropriate licenses, permits, or other documentation required to order, receive, store, and dispense OTC Products or certain Prescription Medications in the Practice’s office in accordance with applicable federal and state law. Such services include, but are not limited to, assisting Practices with insurance claim processing, prior authorization, billing and collections, and recordkeeping. CCI offers its fee-based services to Practices participating in the In-Office Dispensing Program. CCI also provides billing and collection services on behalf of SCLLC in connection with SCLLC’s sales and distribution of OTC Products to Practices participating in the OTC Program.

SCLLC offers OTC Products to Practices that desire to make such products available to patients in the Practice’s office through participation in the OTC Program. SCLLC is not a compounding pharmacy, and neither CCI nor SCLLC is involved in creating topicals with compounding pharmacies.

SCLLC also assists the Practices in ordering Prescription Medications directly from licensed pharmaceutical wholesalers and oversees the sale and distribution of Prescription Medications to the Practices. SCLLC does not sell any Prescription Medications to Practices and does not profit from the sale of such medications.

The significant accounting policies of the Company were described in Note 2 to the audited consolidated financial statements included in the Company’s 2019 Annual Report on Form 10-K. There have been no significant changes in the Company’s significant accounting policies for the nine months ended September 30, 2020.

Basis of Presentation

Principles of Consolidation 

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All intercompany accounts and transactions have been eliminated.

The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission.  Therefore, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statement and notes thereto included in the 2019 Form 10-K for the year ended December 31, 2019. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. Certain prior period amounts have been reclassified to conform to the current presentation. 

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates.

Cash and cash equivalents

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its principal cash balances in various financial institutions. These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2020 and December 31, 2019, $1,180,322 and $1,289,897 were in excess of the FDIC insured limit, respectively.

Accounts Receivable 

Accounts receivable are stated at the amount the Company expects to collect from customers. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management has recorded an allowance for doubtful accounts in the amounts of $4,660 and $5,040 at September 30, 2020 and December 31, 2019 respectively. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of the Company’s customers was to deteriorate and adversely affecting their ability to make payments, additional allowances would be required.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU and all subsequently issued clarifying ASUs replaced most existing revenue recognition guidance in U.S. GAAP. The ASU also required expanded disclosures relating to the nature amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new standard effective January 1, 2018, the first day of the Company’s fiscal year. For these reasons, the adoption of this ASU did not have a significant impact on the Company’s financial statements.

Effective January 1, 2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers. The revenue recognition policies as enumerated below reflect the Company’s accounting policies effective January 1, 2018, which did not have a materially different financial statement result than what the results would have been under the previous accounting policies for revenue recognition.

CCI’s revenue results from the consulting services agreements, which included providing services to physicians for billing insurance companies. The Company has determined the performance obligations in these consulting service agreements relate to the satisfaction of billing the insurance company on behalf of the physicians. CCI remits billings to insurance companies on behalf of the physicians, collect the proceeds and remits an agreed upon percentage amount to the physician. The amounts reported as revenue are recorded net of amounts remitted. The Company follows Staff Accounting Bulletin (“SAB”) No. 104, which states that the revenue is not earned until the company has been paid by the insurance company at which time it becomes realized or realizable.

SCLLC’s revenue from the sale of products are recognized when the sale is consummated, and title is transferred. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in the sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. As such, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606.

The following tables disaggregate revenue by major source for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, 2020	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	92,546	$	—	$	92,546
Consulting Services		250,946		—		—		250,946
Total Revenue	$	250,946	$	93,087	$	—	$	343,492

Three Months Ended September 30, 2019	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	169,332	$	—	$	169,332
Consulting Services		658,970		—		—		658,970
Total Revenue	$	658,970	$	169,332	$	—	$	828,302

Nine Months Ended September 30, 2020	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	254,569	$	—	$	254,569
Consulting Services		844,644		—		—		844,644
Total Revenue	$	844,644	$	254,569	$	—	$	1,099,213

Nine Months Ended September 30, 2019	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	585,148	$	—	$	585,148
Consulting Services		2,204,414		—		—		2,204,414
Total Revenue	$	2,204,414	$	585,148	$	—	$	2,789,562

(1) The Company’s corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription.

Inventories

Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, or net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their net realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations. Based on management’s estimate, there was no obsolete inventory at September 30, 2020 and December 31, 2019.

Property and Equipment

Property and equipment are stated at cost. Expenditures for additions are capitalized, repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows:

	September 30, 2020			December 31, 2019
Machinery and equipment – 7 years	$	44,497		$	44,497
Accumulated depreciation		(24,368	)		(20,626	)
Total property and equipment	$	20,129		$	23,871

Intangible Assets

Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization, unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined.

Intangible assets are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified.

The Company calculates fair value of our intangible assets as the present value of estimated future cash flows the Company expects to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, The Company uses estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group).

During the third quarter 2019, the Company reviewed its customer lists and impaired approximately 50% of its value, or $1,061,200.

Goodwill

Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles—Goodwill and Other,” goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired.

In January 2017, the FASB issued ASU 2017-04 that eliminates “step 2” from the goodwill impairment test. The Company made the election to early adopt ASU 2017-04 as of January 1, 2018 and the standard was applied on a prospective basis, as required. In accordance with ASC 350-25-35-3, “An entity may first assess qualitative factors, as described in paragraphs 350-20-35-3A through 35-3G, to determine whether it is necessary to perform the quantitative goodwill impairment test.” Management reviewed the following qualitative factors around its goodwill and believes that the fair value of its investment in the Company exceeds its carrying amount at September 30, 2020 and December 31, 2019. 

The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of December 31 and whenever events or changes in circumstances indicate carrying amount may not be recoverable.

When assessing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a two-step impairment test. If the Company concludes otherwise, then no further action is taken. The Company also has the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit.

In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.

The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit.

If the carrying amount of a reporting unit is in excess of its fair value, an impairment may exist, and the Company must perform the second step of the impairment analysis to measure the amount of the impairment loss, by allocating the reporting unit’s fair value to its assets and liabilities other than goodwill, comparing the carrying amount of the goodwill to the resulting implied fair value of the goodwill, and recording an impairment charge for any excess.

Stock-based compensation

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the fair value of the award is calculated on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for common shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, the fair value of the award on the date of grant is calculated in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

Income Taxes

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding, noted above.

Accounting for Business Combinations

In accordance with ASC Topic 805, “Business Combinations,” when accounting for business combinations we are required to recognize the assets acquired, liabilities assumed, contractual contingencies, non-controlling interests and contingent consideration at their fair value as of the acquisition date. These items are recorded on our unaudited consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of acquired businesses are included in the unaudited consolidated statements of operations since their respective acquisition dates.

The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets, estimated contingent consideration payments and/or pre-acquisition contingencies, all of which ultimately affect the fair value of goodwill established as of the acquisition date. Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date and is then subsequently tested for impairment at least annually. If the fair value of the net assets acquired exceeds the purchase price consideration, we record a gain on bargain purchase. However, in such a case, before the measurement period closes we perform a reassessment to reconfirm whether we have correctly identified all of the assets acquired and all of the liabilities assumed as of the acquisition date.

As part of our accounting for business combinations we are required to estimate the useful lives of identifiable intangible assets recognized separately from goodwill. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the acquired business. An intangible asset with a finite useful life shall be amortized; an intangible asset with an indefinite useful life shall not be amortized. We base the estimate of the useful life of an intangible asset on an analysis of all pertinent factors, in particular, all of the following factors with no one factor being more presumptive than the other:

● The expected use of the asset.

● The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate.

● Any legal, regulatory, or contractual provisions that may limit the useful life.

● Our own historical experience in renewing or extending similar arrangements, consistent with our intended use of the asset, regardless of whether those arrangements have explicit renewal or extension provisions.

● The effects of obsolescence, demand, competition, and other economic factors.

● The level of maintenance expenditures required to obtain the expected future cash flows from the asset.

If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset shall be considered to be indefinite. The term indefinite does not mean the same as infinite or indeterminate. The useful life of an intangible asset is indefinite if that life extends beyond the foreseeable horizon—that is, there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the acquired business.

Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired entity and are inherently uncertain. Examples of critical estimates in accounting for acquisitions include but are not limited to:

● future expected cash flows from sales of products and services and related contracts and agreements;

● discount and long-term growth rates; and

● the estimated fair value of the acquisition-related contingent consideration, which is performed using a probability-weighted income approach based upon the forecasted achievement of post-acquisition pre-determined targets;

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Going Concern

9 Months Ended

Sep. 30, 2020

Going Concern

Going Concern

NOTE 2 – Going Concern

The accompanying unaudited financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has been incurring losses and with the ongoing COVID-19 outbreak, finds an ongoing lack of revenues sufficient to cover its operating costs and is dependent on refinancing debt, which matured on September 29, 2020 to fund its operations (see Note 13). Management of the Company is making efforts to refinance its debts with its lender. Management of the Company believes, there can be no assurance that the Company will be able to raise additional equity capital or be successful in increasing revenues enough to sustain its operating expenses. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying unaudited financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES act was enacted as a response to the COVID-19 outbreak discussed above and is meant to provide companies with economic relief.  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. 

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Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

NOTE 3 – Leases

Adoption of ASC Topic 842, Leases

On January 1, 2019, the Company adopted ASC 842, Leases, using a modified retrospective method applied to all contracts as of January 1, 2019. Therefore, for reporting periods beginning after December 31, 2018, the financial statements are prepared in accordance with the current lease standard and the financial statements for all periods prior to January 1, 2019 are presented under the previous lease standard (“ASC 840”).

The Company determines if an arrangement is a lease, or contains a lease, when a contract is signed. The Company determines if a lease is an operating or financing lease and records a lease asset and a lease liability upon lease commencement.

The Company had operating leases for office space in Arkansas and South Carolina. The Company has no finance leases as of September 30, 2020. For office space, the Company has elected to combine the fixed payments to lease the asset and any fixed non-lease payments (such as maintenance or utility charges) when calculating the lease asset and lease liability. On July 29, 2019, the Company terminated its Arkansas lease effect October 31, 2019 in accordance with Section 8 of their First Amendment. On October 6, 2019, the Company entered into a new one year lease in Arkansas beginning on November 1, 2019 with monthly rent in the amount of $1,210 per month. As of October 1, 2020, the Company renewed the lease (See Note 13). The Company has a lease in Florida with a monthly rent of $80.

On July 28, 2020, the Company entered into a lease termination with Ana maid, LLC, the October 30, 2018 lease was terminated effective July 31, 2020, for a payment of $4,650 and the deposit. As a result, the Company closed its South Carolina office.

The Company recognizes lease expense on a straight-line basis over the lease term. Certain of our lease agreements include rent payments which are adjusted periodically for inflation. Any change in payments due to changes in inflation rates are recognized as variable lease expense as they are incurred. Variable lease expense also includes costs for property taxes, insurance and services provided by the lessor which are charged based on usage or performance.

Some leases have one or more options to renew, with renewal terms that can initially extend the lease term for various periods up to 2 years. The exercise of renewal options for office space and data centers is at the Company’s discretion and are included if they are reasonably certain to be exercised.

When the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as its discount rate to determine the present value of its lease payments. The incremental borrowing rates approximate the rate the Company would pay to borrow in the currency of the lease payments on a collateralized basis for the weighted-average life of the lease.

 The Company recognized the following related to leases in its Unaudited Consolidated Balance Sheets at September 30, 2020 and December 31, 2019.

Leases	Classification in Consolidated Balance Sheets	September 30, 2020		December 31, 2019
Operating lease assets	Right of use asset	$	—	$	25,001
Lease Liabilities:
Current operating lease liabilities	Right of use liability	$	—	$	8,040
Long-term operating lease liabilities	Right of use liability		—		16,784
Total operating lease liabilities		$	—	$	24,824

The Company recognized the following related to operating leases in its Unaudited Consolidated Statements of Operations for three and nine months ended September 30, 2020 and 2019:

		Three  Months		Nine Months
	Classification in Unaudited	Ended September		Ended September
Leases	Consolidated Statements of Operations	30, 2020		30, 2020
Lease expense	General and administrative and Information technology	$	—	$	4,744
Total lease expense		$	—	$	4,744

		Three Months		Nine Months
	Classification in Unaudited	Ended September		Ended September
Leases	Consolidated Statements of Operations	30, 2019		30, 2019
Lease expense	General and administrative and Information technology	$	15,522	$	46,566
Total lease expense		$	15,522	$	46,566

Supplemental cash flow information related to operating leases for the three and nine months as of September 30, 2020 and 2019 are as follows:

	Three Months		Nine Months
	Ended September 30,		Ended September 30,
Leases	2020		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	—	$	4,744
Right-of-use assets obtained in exchange for lease obligations:
Operating Leases	$	—	$	—

	Three Months		Nine Months
	Ended September 30,		Ended September 30,
Leases	2019		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	15,522	$	46,566
Right-of-use assets obtained in exchange for lease obligations:
Operating Leases	$	—	$	—

“Operating lease amortization” presented in the operating activities section of the Unaudited Consolidated Statement of Cash Flows reflects the portion of the operating lease expense that amortized the operating lease asset.

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Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

NOTE 4 – Intangible Assets

Amortizing Intangible Assets	Estimates Useful Life	Gross Carrying Amount September 30, 2020			Gross Carrying Amount December 31, 2019
Customer Lists	8 years	$	1,326,500		$	1,326,500
Tradenames	15 years		377,000			377,000
IP Technologies	10 years		819,000			819,000
Non-compete	5 years		464,000			464,000
			2,986,500			2,986,500
Less: Accumulated Amortization			(1,030,613	)		(756,378	)
		$	1,955,887		$	2,230,122

The amortization expense related to the intangible assets was $91,412 and $274,235 for the three and nine months ended September 30, 2020 and $116,283 and $348,850 for the three and nine months ended September 30, 2019. During the third quarter 2019, the Company reviewed its customer lists and impaired approximately 50% of its value, or $1,061,200.

The valuation of the assets acquired and liabilities assumed in connection with this acquisition was based on fair values at the acquisition date. The assets purchased and liabilities assumed for these acquisitions have been reflected in the accompanying consolidated balance sheets.

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Notes payable

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Notes payable

NOTE 5 – Notes payable

The Company obtained a secured convertible note with a lender for $5 million, interest was payable monthly, at 12.75% per annum, the note matured on September 29, 2020 (see Note 13). The note can be converted at any time in whole or in part at $0.44 per share. In addition, the lender received 3,584,279 shares of common stock valued at $0.10 per share along with a 2% original issue discount. The total amount of the discount is $493,345. The Company had incurred $34,917 in loan costs. Both the discount and loan costs were presented as a discount to the note payable. The Company recorded $477,405 and $154,500 of payment-in-kind interest which was added to the note as of September 30, 2020 and December 31, 2019, respectively. The note is collateralized by substantially all the assets of the Company. During November 2020, the Company renegotiated its note (see Note 13).

The Company, as part of consideration for the purchase of CCI and SCLLC, issued a $2.5 million promissory note to the seller. The note is non-interest bearing with five annual payments of $500,000 (subject to adjustment to $377,400 if the business of CCI and SCLLC does not meet certain financial targets in 2017 and 2018) and matures on September 30, 2022. Interest has been imputed at 12.75% per annum. The note is in default as of September 30, 2018 due to the Company not making the required principal payment (see Note 11).

The Company has expensed default interest (17% per annum) in the amounts of $107,123 and $319,041 as of three and nine months September 30, 2020 and 2019, respectively. Upon each annual payment date (each, a “Due Date”), the holder may elect to convert the annual installment of the principal amount due into shares of common stock at a conversion price equal to 50% of “fair market value,” which is defined as the average closing price for the shares on the principal market on which they are traded during the thirty (30) trading days prior to the applicable Due Date, provided, further, that (a) the conversion price shall not be lower than $2.00 per share, subject to adjustment for stock splits, stock dividends and similar recapitalization events; and (b) in the event such conversion price as so adjusted is lower than $2.00 per share, the installment payable upon such Due Date may not be converted into shares without written agreement between the Company and the seller. 

On April 17, 2020, the Company obtained two Notes under the Paycheck Protection Program (PPP) in the amount of $57,965 and $59,748 with Iberia Bank. The interest rates on these Notes will be at a fixed rate of 1%, per annum, however no interest will be due during the first six months after the loan was disbursed. After the six-month deferral period and taking into account any loan forgiveness as approved by the SBA, the remaining principal and accrued interest will be payable monthly. The Notes will mature on April 17, 2022.

	September 30, 2020		December 31, 2019
Note payable – monthly interest, 12.75% per annum, matured on September 29, 2020 (see Note 13)	$	5,834,508	$	5,304,500
Less discounts		—		(123,336	)
Notes payable – PPP, 1% per annum, matures on April 17, 2022		117,713		—
Note payable – monthly interest, 17.00% per annum, matures on September 30, 2022 (The loan is currently in default and currently payable.)		2,500,000		2,500,000
Less discounts		—		—
Subtotal		8,452,221		7,681,164
Less: current portion		8,406,444		7,681,164
Long-term portion	$	45,777	$	—

Principal payments on the above notes mature as follows:

2020	$	8,347,587
2021		78,475
2022		26,159
2023		—
2024		—
Thereafter	$	8,452,221

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Related Party

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Related Party

NOTE 6 – Related Party

On January 10, 2018, the Company entered into employment agreement with David Hopkins, its President, effective as of January 1, 2018. Pursuant to the employment agreement, Mr. Hopkins assumed the additional position of Chief Executive Officer of the Company. The employment agreement is for an initial term of three (3) and automatically renews for additional three (3) year periods, provided that the Company achieves Adjusted EBITDA (as defined) of $3,500,000 for any calendar year during the initial term and any renewal term.

The employment agreement provides for an initial base salary of $175,000. In the event in any calendar year during the initial term or any renewal term, HRD achieves Adjusted EBITDA of $3,500,000, Mr. Hopkins’ annual base salary shall automatically increase to $250,000 and in the event in any calendar year during the initial term or any renewal term, the Company achieves Adjusted EBITDA of $5,000,000, his annual base salary shall automatically increase to $325,000. Mr. Hopkins will also receive a $600 per month car allowance while the employment agreement is in effect.

In addition to the foregoing, pursuant to the employment agreement, Mr. Hopkins was granted an option to purchase 525,000 shares of HRD common stock under the Company’s 2015 Stock Incentive Plan at an exercise price of $0.35 per share. The option vests in six equal semi-annual installments commencing September 30, 2018, expires ten (10) years from the date of grant and is otherwise subject to the terms of the Incentive Plan. 

In consideration for David Hopkins, the Company’s Chief Executive Officer and President, assuming the additional duties of President of the Company’s two subsidiaries, CCI and SCLLC, on May 31, 2019, the Company entered into an amended and restated employment agreement with Mr. Hopkins, effective as of April 15, 2019 (the “Effective Date”), which superseded the January 2018 employment agreement between the Company and Mr. Hopkins. The amended and restated employment agreement is for an initial term of three (3) years from the Effective Date and automatically renews for additional three (3) year periods, provided that the subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,000,000 for any calendar year during the initial term and any renewal term.

The amended and restated employment agreement provides for an initial base salary of $250,000. In the event in any calendar year during the initial term or any renewal term, the Subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,000,000, Mr. Hopkins’ annual base salary shall automatically increase to $300,000 and in the event in any calendar year during the initial term or any renewal term, the subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,500,000, his annual base salary shall automatically increase to $350,000. Mr. Hopkins will also receive a $600 per month car allowance while the amended and restated employment agreement is in effect.

The Company had a secured convertible note with a lender for $5 million (see Note 5 and 13).

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Stockholders' Deficiency

9 Months Ended

Sep. 30, 2020

STOCKHOLDERS' DEFICIENCY

Stockholders' Deficiency

NOTE 7 – Stockholders’ Deficiency

The Company has authorized 100,000,000 shares of common stock $.001 par value and 5,000,000 shares of preferred stock $.001 par value.

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2015 Incentive Stock Plan

9 Months Ended

Sep. 30, 2020

Incentive Stock Plan Abstract

2015 Incentive Stock Plan

NOTE 8 – 2015 Incentive Stock Plan

Our 2015 Incentive Stock Plan (the “Incentive Plan”) provides for equity incentives to be granted to our employees, executive officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the Incentive Plan, restricted stock awards, other stock based awards, or any combination of the foregoing. The Incentive Plan is administered by the board of directors. 3,000,000 shares of our common stock are reserved for issuance pursuant to the exercise of awards under the Incentive Plan. The number of shares so reserved automatically adjusts upward on January 1 of each year, so that the number of shares covered by the Incentive Plan is equal to 15% of our issued and outstanding common stock. As of September 30, 2020 options to purchase 1,087,500 shares at an exercise price of $0.35 per share have been granted and are outstanding under the Incentive Plan.

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Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 9 – Income Taxes

Income tax benefit for the three months ended September 30, 2020 and 2019 was $154,519 and $354,707, respectively. Income tax benefit for the nine months ended September 30, 2020 and 2019 was $454,053 and $461,840, respectively. The effective tax rates for the periods were 27%   respectively. The 2018 tax rate reflects the enactment of the Tax Cuts and Jobs Act of 2017 (the “Act”) which made significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017.

 As of September 30, 2020, the Company has approximately $2,285,367 of federal and state net operating loss carryovers (“NOLs”) which carry forward indefinitely.  

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established $0 valuation allowance against the deferred tax asset relating to NOLs because it is more likely than not that all of the deferred tax asset will be realized.

The Company files U.S. federal and state of Florida and Arkansas tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2016. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.

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Business Segment Information

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Business Segment Information

NOTE 10 – Business Segment Information

The Company has two reportable segments (billing services and OTC and prescription medication) supported by a corporate group which conducts activities that are non-segment specific. The following table present selected financial information about the Company’s reportable segments for the three and nine months ended September 30, 2020 and 2019.

For the three months   ended September 30, 2020	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	343,492		$	250,405	$	93,087	$	—
Cost of Revenue		64,547			—		64,547		—
Long-lived assets		5,289,242			4,800,270		488,972		—
Income (loss) before income tax		(572,218	)		171,861		29,850		(773,929	)
Identifiable assets		1,976,016			1,487,044		488,972		—
Depreciation and amortization		95,556			71,667		23,889		—

For the nine months ended September 30, 2020	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	1,099,213		$	844,644	$	254,569	$	—
Cost of Revenue		174,458			—		174,458		—
Long-lived assets		5,289,242			4,800,270		488,972		—
Income (loss) before income tax		(1,681,602	)		531,966		79,308		(2,292,876	)
Identifiable assets		1,976,016			1,487,044		488,972		—
Depreciation and amortization		286,706			215,030		71,676		—

For the three months ended September 30, 2019	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	828,302		$	658,970	$	169,332	$	—
Cost of Revenue		127,661			—		127,661		—
Long-lived assets		5,815,666			5,235,282		580,384		—
Income (loss) before income tax		(1,313,728	)		406,299		31,556		(1,751,583	)
Identifiable assets		2,502,440			1,922,056		580,384		—
Depreciation and amortization		121,100			90,825		30,275		—
Impairment loss		1,061,200			—		—		1,061,200

For the nine months ended September 30, 2019	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	2,789,562		$	2,204,414	$	585,148	$	—
Cost of Revenue		431,102			—		431,102		—
Long-lived assets		5,815,666			5,235,282		580,384		—
Income (loss) before income tax		(1,710,516	)		1,368,109		116,891		(3,195,516	)
Identifiable assets		2,502,440			1,922,056		580,384		—
Depreciation and amortization		363,356			272,517		90,839		—
Impairment loss		1,061,200			—		—		1,061,200

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Litigation

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Litigation

NOTE 11 – Litigation

In August 2018, we were served with a complaint (which was amended in September 2018 to include David Hopkins, our CEO, as a defendant), filed in Miami-Dade County, Florida Circuit Court by the seller of CCI and SCLLC. In the complaint, the seller alleges breach of contract and fraud in that we allegedly failed to pay him excess working capital as of the closing of the acquisition of approximately $381,000 and failed to reimburse him for certain credit card expenses. We believe that the seller’s claims are without merit, as his calculation of working capital does not follow the methodology provided for in the Securities Purchase Agreement for the transaction and that in fact, there was a working capital shortfall at closing of approximately $725,000 (for which we demanded payment in September 2018). Moreover, the seller has refused to submit the working capital dispute to the resolution process provided for in the Securities Purchase Agreement. We have answered the complaint denying the seller’s claims and have filed counterclaims against the seller for the sums we believe are do us for the working capital shortfall and for damages arising from seller’s breach of contract, breach of good faith and fair dealing, fraud in the inducement, indemnification obligations under the Securities Purchase Agreement and violation of his non-competition and non-solicitation agreement with the Company.

The parties have engaged in discovery, and we believe that the information obtained thus far supports our claims and refutes the seller’s claims.  On November 18, 2019, the seller filed a motion, asking the court to stay the case temporarily because he believed he was the target of a parallel federal criminal investigation related to facts at issue in the case.  On December 11, 2019, the court granted his motion and stayed the case for 120 days.

The stay issued by the court on December 11, 2019 expired on April 13, 2020. The seller then moved to stay the case for a second time, again claiming that the instant proceedings overlap with an ongoing federal criminal investigation in which he believes he is a target. Health-Right and Mr. Hopkins opposed Burroughs’ second motion to stay, and the court subsequently denied the seller’s motion.  On April 23, 2020, Health-Right filed an amended counterclaim to add claims against the seller for tortious interference with business relationships and breach of the non-compete and non-solicitation provisions of the Securities Purchase Agreement.  The seller has since filed his answer and affirmative defenses to Health-Right’s amended counterclaim.  Also, on April 23, 2020, the seller filed a second amended complaint against Health-Right and Mr. Hopkins, which Health-Right and Mr. Hopkins moved to dismiss as legally insufficient.   On July 15, 2020, the court granted the motion in part and denied the motion in part.  The court granted the motion, in part, by dismissing with prejudice the seller’s claims against Health-Right and Mr. Hopkins for fraudulent misrepresentation and negligent misrepresentation.  Accordingly, Mr. Hopkins is no longer a party to the case, and only seller’s contract-based claims against Health-Right remain.

The parties continued engaging in discovery. Specifically, the seller produced additional documents responsive to Health-Right's request for production and sat for a second deposition on September 23, 2020. Health-Right discovered that the seller attempted to perpetrate a fraud upon the court by, among other things, doctoring several critical emails. At the seller's second deposition, Health-Right confronted the seller about the doctored emails. In response, the seller invoked his Fifth Amendment Privilege against self-incrimination. The seller's counsel subsequently withdrew from representing the seller. Health-Right has moved to strike the seller's pleadings and for the entry of a default judgment against the seller for his actions. Health-Right's motion is pending. 

In April 2018, Stephen Andrews, the former CEO of CCI, filed a wrongful termination arbitration claim seeking recovery in the amount in excess of $500,000. In addition to raising defenses, the Company has filed a counterclaim alleging violation of non-disclosure/non-compete agreements by Mr. Andrews as well as claims for breach of a non-solicitation agreement, breach of the employee manual and injunctive relief. The final arbitration hearing was scheduled for January 2020.  However, Andrews moved for a stay of the arbitration on November 20, 2019 based on his belief that he is the target of a parallel federal criminal grand jury investigation.  The arbitrator granted the stay on December 17, 2019 and the final arbitration hearing was postponed indefinitely.

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Concentration

9 Months Ended

Sep. 30, 2020

Concentration

Concentration

NOTE 12 – Concentration

The Company offers physicians and medical clinics an ancillary program to treat their patients with topical prescription medicine to manage pain. The program is designed for patients with work related injuries managed under worker compensation claims. The program both delivers the topical medicine to the care provider for sale to the patient, as well as providing the care provider with insurance claim processing services on behalf of the patient.

Accounts Receivable Concentration

	At September 30, 2020		At December 31, 2019
Number of customers over 10%		5		6
Percentage of accounts receivable		12%, 13%, 16%, 26%, 27%		10%, 12%, 13%, 13%, 15%, 18	%

We have two vendors who represent 100% of purchased products that are sold for nine months 2020 and 2019.

For the three months ended September 30, 2020, the Company had two clinics that represented 12%, and 17% of total revenue. For the three months ended September 30, 2019, the Company had no clinics that represented more than 10% of total revenue. 

For the nine months ended September 30, 2020, the Company had three clinics that represented 11%, 12%, and 17% of total revenue. For the nine months ended September 30, 2019, the Company had no clinics that represented more than 10% of total revenue.

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Subsequent Events

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Subsequent Events

NOTE 13 – Subsequent Events

The Company has evaluated subsequent events through the date that the financial statements were issued and determined that there were the following subsequent events requiring adjustment to or disclosure in the financial statements.

On October 1, 2020, the Company entered into a one year lease in Arkansas beginning on November 1, 2020 with monthly rent in the amount of $1,210 per month.

On November 16, 2020, effective retroactive to October 1, 2020. the Company restructured the $5,000,000 principal amount senior secured convertible note (the “Original GPB Note”) that the Company had issued to GPB Debt Holdings II, LLC (“GPB”) on September 29, 2017 in connection with financing the Acquisition. The Original GPB Note came due on September 29, 2020.

In connection with the restructuring, the Company entered into an Exchange Agreement with GPB (the “Exchange Agreement”). Pursuant to the Exchange Agreement, (a) the Company made a principal payment of $1,000,000 on the Original GPB Note; (b) issued a new $3,500,00 principal amount senior secured convertible note to GPB; and (c) issued to GPB an additional 3,206,525 shares of the Company’s common stock(“HRD Shares”).

The New GPB Note, which matures on September 30, 2023 (the “Maturity Date”), provides for cash interest at the rate of 8% per annum, which accrues and is payable monthly commencing April 1, 2021. In addition, the New GPB Note also provides for an annual payment of paid in kind interest at the rate of 11.5% for the period from October 1, 2020 through March 31, 2021, and at the rate of 3.0% per annum thereafter.

The New GPB Note (including accrued and unpaid interest) may be prepaid, in whole or in part, at the option of the Company at any time prior to the Maturity Date, so long as a minimum of $200,000 is prepaid each time a repayment is made, upon thirty (30) days’ prior written notice; provided, however, that during such notice period, GPB may exercise its conversion rights described below with respect to the portion of the New GPB Note proposed to be prepaid. No success fee or other premium will be due in connection with an optional prepayment.

In addition to optional prepayment, if on the last day of each calendar quarter prior to the Maturity Date or earlier repayment of the New GPB Note in full, available cash held by the Company in its and its subsidiaries’ bank accounts exceeds $1,000,000, after giving effect to all accruals and expenses accounted for in that calendar quarter, the Company shall make a mandatory prepayment to GPB of $200,000, which shall be applied to reduction of the outstanding principal amount of the New GPB Note.

The New GPB Note is convertible at any time, in whole or in part, at GPB’s option, into HRD Shares at a conversion price of $0.44 per GPB Share, with customary adjustments for stock splits, stock dividends and other recapitalization events.

The New GPB Note (a) provides for customary affirmative and negative covenants, including restrictions on the Company incurring subsequent debt; (b) contains customary event of default provisions; and (c) is secured by a lien on all of the assets of the Company, including its intellectual property, pursuant to an amended and restated security agreement entered into between the Company and GPB. 

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation 

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All intercompany accounts and transactions have been eliminated.

The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission.  Therefore, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statement and notes thereto included in the 2019 Form 10-K for the year ended December 31, 2019. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. Certain prior period amounts have been reclassified to conform to the current presentation. 

Use of Estimates

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. 

Cash and cash equivalents

Cash and cash equivalents

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

Concentration of Risk

Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its principal cash balances in various financial institutions. These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2020 and December 31, 2019, $1,180,322 and $1,289,897 were in excess of the FDIC insured limit, respectively.

Accounts Receivable

Accounts Receivable 

Accounts receivable are stated at the amount the Company expects to collect from customers. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management has recorded an allowance for doubtful accounts in the amounts of $4,660 and $5,040 at September 30, 2020 and December 31, 2019 respectively. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of the Company’s customers was to deteriorate and adversely affecting their ability to make payments, additional allowances would be required.

Revenue Recognition

Revenue Recognition 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU and all subsequently issued clarifying ASUs replaced most existing revenue recognition guidance in U.S. GAAP. The ASU also required expanded disclosures relating to the nature amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new standard effective January 1, 2018, the first day of the Company’s fiscal year. For these reasons, the adoption of this ASU did not have a significant impact on the Company’s financial statements. 

Effective January 1, 2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers. The revenue recognition policies as enumerated below reflect the Company’s accounting policies effective January 1, 2018, which did not have a materially different financial statement result than what the results would have been under the previous accounting policies for revenue recognition.

CCI’s revenue results from the consulting services agreements, which included providing services to physicians for billing insurance companies. The Company has determined the performance obligations in these consulting service agreements relate to the satisfaction of billing the insurance company on behalf of the physicians. CCI remits billings to insurance companies on behalf of the physicians, collect the proceeds and remits an agreed upon percentage amount to the physician. The amounts reported as revenue are recorded net of amounts remitted. The Company follows Staff Accounting Bulletin (“SAB”) No. 104, which states that the revenue is not earned until the company has been paid by the insurance company at which time it becomes realized or realizable. 

SCLLC’s revenue from the sale of products are recognized when the sale is consummated, and title is transferred. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in the sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. As such, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606. 

The following tables disaggregate revenue by major source for the three and nine months ended September 30, 2020 and 2019: 

Three Months Ended September 30, 2020	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	92,546	$	—	$	92,546
Consulting Services		250,946		—		—		250,946
Total Revenue	$	250,946	$	93,087	$	—	$	343,492

Three Months Ended September 30, 2019	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	169,332	$	—	$	169,332
Consulting Services		658,970		—		—		658,970
Total Revenue	$	658,970	$	169,332	$	—	$	828,302

Nine Months Ended September 30, 2020	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	254,569	$	—	$	254,569
Consulting Services		844,644		—		—		844,644
Total Revenue	$	844,644	$	254,569	$	—	$	1,099,213

Nine Months Ended September 30, 2019	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	585,148	$	—	$	585,148
Consulting Services		2,204,414		—		—		2,204,414
Total Revenue	$	2,204,414	$	585,148	$	—	$	2,789,562

(1) The Company’s corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription.

Inventories

Inventories

Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, or net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their net realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations. Based on management’s estimate, there was no obsolete inventory at September 30, 2020 and December 31, 2019.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Expenditures for additions are capitalized, repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows:

	September 30, 2020			December 31, 2019
Machinery and equipment – 7 years	$	44,497		$	44,497
Accumulated depreciation		(24,368	)		(20,626	)
Total property and equipment	$	20,129		$	23,871

Intangible Assets

Intangible Assets

Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization, unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined.

Intangible assets are tested annually for impairment and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset group exceeds its fair value. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified.

The Company calculates fair value of our intangible assets as the present value of estimated future cash flows the Company expects to generate from the asset using a risk-adjusted discount rate. In determining our estimated future cash flows associated with our intangible assets, The Company uses estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset (asset group).

During the third quarter 2019, the Company reviewed its customer lists and impaired approximately 50% of its value, or $1,061,200.

Goodwill

Goodwill

Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. In accordance with ASC 350, “Intangibles—Goodwill and Other,” goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired.

In January 2017, the FASB issued ASU 2017-04 that eliminates “step 2” from the goodwill impairment test. The Company made the election to early adopt ASU 2017-04 as of January 1, 2018 and the standard was applied on a prospective basis, as required. In accordance with ASC 350-25-35-3, “An entity may first assess qualitative factors, as described in paragraphs 350-20-35-3A through 35-3G, to determine whether it is necessary to perform the quantitative goodwill impairment test.” Management reviewed the following qualitative factors around its goodwill and believes that the fair value of its investment in the Company exceeds its carrying amount at September 30, 2020 and December 31, 2019. 

The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of December 31 and whenever events or changes in circumstances indicate carrying amount may not be recoverable.

When assessing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a two-step impairment test. If the Company concludes otherwise, then no further action is taken. The Company also has the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit.

In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.

The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit.

If the carrying amount of a reporting unit is in excess of its fair value, an impairment may exist, and the Company must perform the second step of the impairment analysis to measure the amount of the impairment loss, by allocating the reporting unit’s fair value to its assets and liabilities other than goodwill, comparing the carrying amount of the goodwill to the resulting implied fair value of the goodwill, and recording an impairment charge for any excess.

Stock-based compensation

Stock-based compensation

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the fair value of the award is calculated on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for common shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, the fair value of the award on the date of grant is calculated in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

Income Taxes

Income Taxes

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

Earnings (Loss) Per Share

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding, noted above.

Accounting for Business Combinations

Accounting for Business Combinations

In accordance with ASC Topic 805, “Business Combinations,” when accounting for business combinations we are required to recognize the assets acquired, liabilities assumed, contractual contingencies, non-controlling interests and contingent consideration at their fair value as of the acquisition date. These items are recorded on our unaudited consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of acquired businesses are included in the unaudited consolidated statements of operations since their respective acquisition dates.

The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets, estimated contingent consideration payments and/or pre-acquisition contingencies, all of which ultimately affect the fair value of goodwill established as of the acquisition date. Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date and is then subsequently tested for impairment at least annually. If the fair value of the net assets acquired exceeds the purchase price consideration, we record a gain on bargain purchase. However, in such a case, before the measurement period closes we perform a reassessment to reconfirm whether we have correctly identified all of the assets acquired and all of the liabilities assumed as of the acquisition date.

As part of our accounting for business combinations we are required to estimate the useful lives of identifiable intangible assets recognized separately from goodwill. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the acquired business. An intangible asset with a finite useful life shall be amortized; an intangible asset with an indefinite useful life shall not be amortized. We base the estimate of the useful life of an intangible asset on an analysis of all pertinent factors, in particular, all of the following factors with no one factor being more presumptive than the other:

● The expected use of the asset.

● The expected useful life of another asset or a group of assets to which the useful life of the intangible asset may relate.

● Any legal, regulatory, or contractual provisions that may limit the useful life.

● Our own historical experience in renewing or extending similar arrangements, consistent with our intended use of the asset, regardless of whether those arrangements have explicit renewal or extension provisions.

● The effects of obsolescence, demand, competition, and other economic factors.

● The level of maintenance expenditures required to obtain the expected future cash flows from the asset.

If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset to the reporting entity, the useful life of the asset shall be considered to be indefinite. The term indefinite does not mean the same as infinite or indeterminate. The useful life of an intangible asset is indefinite if that life extends beyond the foreseeable horizon—that is, there is no foreseeable limit on the period of time over which it is expected to contribute to the cash flows of the acquired business.

Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired entity and are inherently uncertain. Examples of critical estimates in accounting for acquisitions include but are not limited to:

● future expected cash flows from sales of products and services and related contracts and agreements;

● discount and long-term growth rates; and

● the estimated fair value of the acquisition-related contingent consideration, which is performed using a probability-weighted income approach based upon the forecasted achievement of post-acquisition pre-determined targets;

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Schedule of disaggregates revenue

The following tables disaggregate revenue by major source for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, 2020	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	92,546	$	—	$	92,546
Consulting Services		250,946		—		—		250,946
Total Revenue	$	250,946	$	93,087	$	—	$	343,492

Three Months Ended September 30, 2019	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	169,332	$	—	$	169,332
Consulting Services		658,970		—		—		658,970
Total Revenue	$	658,970	$	169,332	$	—	$	828,302

Nine Months Ended September 30, 2020	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	254,569	$	—	$	254,569
Consulting Services		844,644		—		—		844,644
Total Revenue	$	844,644	$	254,569	$	—	$	1,099,213

Nine Months Ended September 30, 2019	Ancillary Program		OTC and Prescription Medication		Corporate (1)		Total
Product Sales	$	—	$	585,148	$	—	$	585,148
Consulting Services		2,204,414		—		—		2,204,414
Total Revenue	$	2,204,414	$	585,148	$	—	$	2,789,562

(1) The Company’s corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription.

Schedule of property and equipment

Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows:

	September 30, 2020			December 31, 2019
Machinery and equipment – 7 years	$	44,497		$	44,497
Accumulated depreciation		(24,368	)		(20,626	)
Total property and equipment	$	20,129		$	23,871

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Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Schedule of related to leases in its unaudited condensed consolidated balance sheet

The Company recognized the following related to leases in its Unaudited Consolidated Balance Sheets at September 30, 2020 and December 31, 2019.

Leases	Classification in Consolidated Balance Sheets	September 30, 2020		December 31, 2019
Operating lease assets	Right of use asset	$	—	$	25,001
Lease Liabilities:
Current operating lease liabilities	Right of use liability	$	—	$	8,040
Long-term operating lease liabilities	Right of use liability		—		16,784
Total operating lease liabilities		$	—	$	24,824

Schedule of operating leases in its unaudited consolidated statement of operations

The Company recognized the following related to operating leases in its Unaudited Consolidated Statements of Operations for three and nine months ended September 30, 2020 and 2019:

		Three  Months		Nine Months
	Classification in Unaudited	Ended September		Ended September
Leases	Consolidated Statements of Operations	30, 2020		30, 2020
Lease expense	General and administrative and Information technology	$	—	$	4,744
Total lease expense		$	—	$	4,744

		Three Months		Nine Months
	Classification in Unaudited	Ended September		Ended September
Leases	Consolidated Statements of Operations	30, 2019		30, 2019
Lease expense	General and administrative and Information technology	$	15,522	$	46,566
Total lease expense		$	15,522	$	46,566

Supplemental cash flow information related to capital leases

Supplemental cash flow information related to operating leases for the three and nine months as of September 30, 2020 and 2019 are as follows:

	Three Months		Nine Months
	Ended September 30,		Ended September 30,
Leases	2020		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	—	$	4,744
Right-of-use assets obtained in exchange for lease obligations:
Operating Leases	$	—	$	—

	Three Months		Nine Months
	Ended September 30,		Ended September 30,
Leases	2019		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	15,522	$	46,566
Right-of-use assets obtained in exchange for lease obligations:
Operating Leases	$	—	$	—

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

Amortizing Intangible Assets	Estimates Useful Life	Gross Carrying Amount September 30, 2020			Gross Carrying Amount December 31, 2019
Customer Lists	8 years	$	1,326,500		$	1,326,500
Tradenames	15 years		377,000			377,000
IP Technologies	10 years		819,000			819,000
Non-compete	5 years		464,000			464,000
			2,986,500			2,986,500
Less: Accumulated Amortization			(1,030,613	)		(756,378	)
		$	1,955,887		$	2,230,122

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Notes payable (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of note payable

The Notes will mature on April 17, 2022.

	September 30, 2020		December 31, 2019
Note payable – monthly interest, 12.75% per annum, matured on September 29, 2020 (see Note 13)	$	5,834,508	$	5,304,500
Less discounts		—		(123,336	)
Notes payable – PPP, 1% per annum, matures on April 17, 2022		117,713		—
Note payable – monthly interest, 17.00% per annum, matures on September 30, 2022 (The loan is currently in default and currently payable.)		2,500,000		2,500,000
Less discounts		—		—
Subtotal		8,452,221		7,681,164
Less: current portion		8,406,444		7,681,164
Long-term portion	$	45,777	$	—

Schedule of principal payments on maturity

Principal payments on the above notes mature as follows:

2020	$	8,347,587
2021		78,475
2022		26,159
2023		—
2024		—
Thereafter	$	8,452,221

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Business Segment Information (Tables)

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Schedule of reportable segments

The following table present selected financial information about the Company’s reportable segments for the three and nine months ended September 30, 2020 and 2019.

For the three months   ended September 30, 2020	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	343,492		$	250,405	$	93,087	$	—
Cost of Revenue		64,547			—		64,547		—
Long-lived assets		5,289,242			4,800,270		488,972		—
Income (loss) before income tax		(572,218	)		171,861		29,850		(773,929	)
Identifiable assets		1,976,016			1,487,044		488,972		—
Depreciation and amortization		95,556			71,667		23,889		—

For the nine months ended September 30, 2020	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	1,099,213		$	844,644	$	254,569	$	—
Cost of Revenue		174,458			—		174,458		—
Long-lived assets		5,289,242			4,800,270		488,972		—
Income (loss) before income tax		(1,681,602	)		531,966		79,308		(2,292,876	)
Identifiable assets		1,976,016			1,487,044		488,972		—
Depreciation and amortization		286,706			215,030		71,676		—

For the three months ended September 30, 2019	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	828,302		$	658,970	$	169,332	$	—
Cost of Revenue		127,661			—		127,661		—
Long-lived assets		5,815,666			5,235,282		580,384		—
Income (loss) before income tax		(1,313,728	)		406,299		31,556		(1,751,583	)
Identifiable assets		2,502,440			1,922,056		580,384		—
Depreciation and amortization		121,100			90,825		30,275		—
Impairment loss		1,061,200			—		—		1,061,200

For the nine months ended September 30, 2019	Consolidated			Billing Services		OTC and Prescription Medication		Corporate
Revenues	$	2,789,562		$	2,204,414	$	585,148	$	—
Cost of Revenue		431,102			—		431,102		—
Long-lived assets		5,815,666			5,235,282		580,384		—
Income (loss) before income tax		(1,710,516	)		1,368,109		116,891		(3,195,516	)
Identifiable assets		2,502,440			1,922,056		580,384		—
Depreciation and amortization		363,356			272,517		90,839		—
Impairment loss		1,061,200			—		—		1,061,200

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Concentration (Tables)

9 Months Ended

Sep. 30, 2020

Concentration

Schedule of concentration

Accounts Receivable Concentration

	At September 30, 2020		At December 31, 2019
Number of customers over 10%		5		6
Percentage of accounts receivable		12%, 13%, 16%, 26%, 27%		10%, 12%, 13%, 13%, 15%, 18	%

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Summary of Significant Accounting Policies (Details) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Total Revenue		$ 343,492	$ 828,302	$ 1,099,213	$ 2,789,562
Product Sales [Member]
Total Revenue		92,546	169,332	254,569	585,148
Consulting Services[Member]
Total Revenue		250,946	658,970	844,644	2,204,414
Ancillary Program [Member]
Total Revenue		250,946	658,970	844,644	2,204,414
Ancillary Program [Member] | Product Sales [Member]
Total Revenue
Ancillary Program [Member] | Consulting Services[Member]
Total Revenue		250,946	658,970	844,644	2,204,414
OTC and Prescription Medication [Member]
Total Revenue		93,087	169,332	254,569	585,148
OTC and Prescription Medication [Member] | Product Sales [Member]
Total Revenue		92,546	169,332	254,569	585,148
OTC and Prescription Medication [Member] | Consulting Services[Member]
Total Revenue
Corporate [Member]
Total Revenue	[1]
Corporate [Member] | Product Sales [Member]
Total Revenue	[1]
Corporate [Member] | Consulting Services[Member]
Total Revenue	[1]

[1] The Company's corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription.

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Summary of Significant Accounting Policies (Details 1) - USD ($)	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Machinery and equipment, estimated useful life	7 years
Machinery and equipment	$ 44,497	$ 44,497
Accumulated depreciation	(24,368)	(20,626)
Total property and equipment	$ 20,129	$ 23,871

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Accounting Policies [Abstract]
Federal Deposit Insurance Corporation maximum limit		$ 250,000
FDIC insured limit		1,180,322		$ 1,289,897
Allowance for doubtful accounts		4,660		5,040
Obsolete inventory		0		$ 0
Impairment of intangible assets	$ 1,061,200		$ 1,061,200
Percentage of impaired	50.00%

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Leases (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Leases
Operating lease assets		$ 25,001
Lease Liabilities:
Current operating lease liabilities		8,040
Long-term operating lease liabilities		16,784
Total operating lease liabilities		$ 24,824

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Leases (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Total lease expense		$ 15,522	$ 4,744	$ 46,566
General and Administrative and Information Technology [Member]
Total lease expense		$ 15,522	$ 4,744	$ 46,566

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Leases (Details 2) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases		$ 15,522	$ 4,744	$ 46,566
Right-of-use assets obtained in exchange for lease obligations:
Operating Leases

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Leases (Details Narative) - USD ($)			9 Months Ended
	Jul. 28, 2020	Oct. 06, 2019	Sep. 30, 2020
Renew term of lease termination			2 years
Ana Maid, LLC [Member]
Payment amount	$ 4,650
Description of lease terminate	The October 30, 2018 lease will be terminated effective July 31, 2020
ARKANSAS
Term of lease termination		1 year
Monthly rent expense		$ 1,210
Lease renew date		Oct. 01, 2020
FLORIDA
Monthly rent expense		$ 80

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Intangible Assets (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Intangible Assets, Gross	$ 2,986,500	$ 2,986,500
Less: Accumulated Amortization	(1,030,613)	(756,378)
Intangible Assets, Net	$ 1,955,887	2,230,122
Customer Lists [Member]
Estimates useful life	8 years
Intangible Assets, Gross	$ 1,326,500	1,326,500
Trade Names [Member]
Estimates useful life	15 years
Intangible Assets, Gross	$ 377,000	377,000
IP Technologies [Member]
Estimates useful life	10 years
Intangible Assets, Gross	$ 819,000	819,000
Non-compete [Member]
Estimates useful life	5 years
Intangible Assets, Gross	$ 464,000	$ 464,000

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Intangible Assets (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense related the intangible assets	$ 91,412	$ 116,283	$ 274,235	$ 348,850
Impairment of intangible assets		$ 1,061,200		$ 1,061,200
Percentage of impaired		50.00%

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Notes payable (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Note payable	$ 2,500,000	$ 2,500,000
Subtotal	8,452,221	7,681,164
Less: current portion	8,406,444	7,681,164
Long- term portion	45,777
Notes Payable One [Member]
Note payable	5,834,508	5,304,500
Less discounts		(123,336)
Notes Payable Two [Member]
Note payable	2,500,000	2,500,000
Less discounts
Paycheck Protection Program [Member]
Loan forgiveness	$ 117,713

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Notes payable (Details 1)	Sep. 30, 2020 USD ($)
Debt Disclosure [Abstract]
2020	$ 8,347,587
2021	78,475
2022	26,159
2023
2024
Thereafter	$ 8,452,221

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Notes payable (Details Narrative) - USD ($)		3 Months Ended		9 Months Ended		12 Months Ended
	Apr. 17, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Common stock issued		22,869,191		22,869,191		22,869,191
Discount amount		$ 0		$ 0		$ 123,336
Payment-in-kind interest				123,336	$ 123,337
Common Compounds Inc. & EzPharmaRx LLC [Member]
Face amount		$ 2,500,000		$ 2,500,000
Interest rate		12.75%		12.75%
Default interest rate				17.00%
Maturity date				Sep. 30, 2022
Annual payment		$ 500,000		$ 500,000
Interest expense		107,123	$ 319,041	107,123	$ 319,041
Financial targets adjustment		$ 377,400		$ 377,400
Description of equit conversion				common stock at a conversion price equal to 50% of “fair market value,” which is defined as the average closing price for the shares on the principal market on which they are traded during the thirty (30) trading days prior to the applicable Due Date, provided, further, that (a) the conversion price shall not be lower than $2.00 per share, subject to adjustment for stock splits, stock dividends and similar recapitalization events; and (b) in the event such conversion price as so adjusted is lower than $2.00 per share, the installment payable upon such Due Date may not be converted into shares without written agreement between the Company and the seller.
Notes Payable One [Member]
Interest rate		12.75%		12.75%
Maturity date				Sep. 29, 2020
Notes Payable One [Member] | Iberia Bank [Member] | Paycheck Protection Program [Member]
Face amount	$ 57,965
Interest rate	1.00%
Maturity date	Apr. 17, 2022
Notes Payable Two [Member]
Interest rate		17.00%		17.00%
Maturity date				Sep. 30, 2022
Notes Payable Two [Member] | Iberia Bank [Member] | Paycheck Protection Program [Member]
Face amount	$ 59,748
Interest rate	1.00%
Maturity date	Apr. 17, 2022
Lender [Member] | Secured Convertible Note [Member]
Face amount		$ 5,000,000		$ 5,000,000
Interest rate		12.75%		12.75%
Maturity date				Sep. 29, 2020
Number of shares issued				3,584,279
Conversion price per Share		$ 0.44		$ 0.44
Shares issued price per share		$ 0.10		$ 0.10
Original issue discount rate				2.00%
Discount amount		$ 493,345		$ 493,345
Loan cost				34,917
Payment-in-kind interest				$ 477,405		$ 154,500
Description of collateral				The note is collateralized by substantially all the assets of the Company.

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Related Party (Details Narrative) - USD ($)			9 Months Ended
	May 31, 2018	Jan. 10, 2018	Sep. 30, 2020	Sep. 29, 2017
Lender [Member]
Collateral amount				$ 5,000,000
Mr. David Hopkins [Member]
Base Salary	$ 250,000	$ 175,000	$ 325,000
Car allowance per month			600
Adjusted EBITDA			$ 5,000,000
Option granted			525,000
Option exerciseable price			$ 0.35
Term			10 years
Description of establishing terms	The amended and restated employment agreement is for an initial term of three (3) years from the Effective Date and automatically renews for additional three (3) year periods, provided that the subsidiaries achieve combined Adjusted EBITDA (as determined by the Company’s accountants from the subsidiaries’ financial statements used in preparing the Company’s audited financial statements) of $3,000,000 for any calendar year during the initial term and any renewal term.	The employment agreement is for an initial term of three (3) and automatically renews for additional three (3) year periods, provided that the Company achieves Adjusted EBITDA (as defined) of $3,500,000 for any calendar year during the initial term and any renewal term.	Mr. Hopkins' annual base salary shall automatically increase to $250,000 and in the event in any calendar year during the initial term or any renewal term.
CCI And SCLLC [Member]
Base Salary			$ 350,000
Car allowance per month			600
Adjusted EBITDA			$ 3,000,000

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Stockholders' Deficiency (Details Narrative) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
STOCKHOLDERS' DEFICIENCY
Common stock, authorized	100,000,000	100,000,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001

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2015 Incentive Stock Plan (Details Narrative) - 2015 Stock Option Incentive Plan [Member]	9 Months Ended
	Sep. 30, 2020 $ / shares shares
Stock issued for option plan	3,000,000
Options to purchase	1,087,500
Option exerciseable price | $ / shares	$ 0.35

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Income Taxes (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Income tax benefit	$ 154,519	$ 354,707	$ 454,053	$ 461,840
Effective tax rates			27.00%		35.00%
Change in tax rate					21.00%
Federal and state net operating loss carryovers	2,285,367		$ 2,285,367
Valuation allowance deferred tax asset	$ 0		$ 0

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Business Segment Information (Details) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues		$ 343,492	$ 828,302	$ 1,099,213	$ 2,789,562
Cost of Revenue		64,547	127,661	174,458	431,102
Long-lived assets		5,289,242	5,815,666	5,289,242	5,815,666
Income (loss) before income tax		(572,218)	(1,313,728)	(1,681,602)	(1,710,516)
Identifiable assets		1,976,016	2,502,440	1,976,016	2,502,440
Depreciation and amortization		95,556	121,100	286,706	363,356
Impairment loss			1,061,200		1,061,200
Billing Services [Member]
Revenues		250,405	658,970	844,644	2,204,414
Cost of Revenue
Long-lived assets		4,800,270	5,235,282	4,800,270	5,235,282
Income (loss) before income tax		171,861	406,299	531,966	1,368,109
Identifiable assets		1,487,044	1,922,056	1,487,044	1,922,056
Depreciation and amortization		71,667	90,825	215,030	272,517
Impairment loss
OTC and Prescription Medicine [Member]
Revenues		93,087	169,332	254,569	585,148
Cost of Revenue		64,547	127,661	174,458	431,102
Long-lived assets		488,972	580,384	488,972	580,384
Income (loss) before income tax		29,850	31,556	79,308	116,891
Identifiable assets		488,972	580,384	488,972	580,384
Depreciation and amortization		23,889	30,275	71,676	90,839
Impairment loss
Corporate [Member]
Revenues	[1]
Cost of Revenue
Long-lived assets
Income (loss) before income tax		(773,929)	(1,751,583)	(2,292,876)	(3,195,516)
Identifiable assets
Depreciation and amortization
Impairment loss			$ 1,061,200		$ 1,061,200

[1] The Company's corporate group is non-revenue generating and supports our two reportable segments Ancillary Program and Prescription.

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Business Segment Information (Details Narrative)	9 Months Ended
	Sep. 30, 2020 Number
Segment Reporting [Abstract]
Number of reportable segments	2

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Litigation (Details Narrative) - USD ($)	1 Months Ended
	Sep. 30, 2018	Aug. 31, 2018	Apr. 30, 2018
Chief Executive Officer [Member]
Working capital		$ 381,000
Termination of arbitration claim			$ 500,000
Arbitration hearing			The final arbitration hearing was scheduled for January 2020.
Seller [Member] | Securities Purchase Agreement [Member]
Working capital shortfall	$ 725,000

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Concentration (Details) - Accounts Receivable [Member] - Customer Concentration Risk [Member] - Number	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Number of customers	5	6
Customer A [Member]
Percentage of revenues	12.00%	10.00%
Customer B [Member]
Percentage of revenues	13.00%	12.00%
Customer C [Member]
Percentage of revenues	16.00%	13.00%
Customer D [Member]
Percentage of revenues	26.00%	13.00%
Customer E [Member]
Percentage of revenues	27.00%	15.00%
Customer F [Member]
Percentage of revenues		18.00%

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Concentration (Details Narrative)	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020
Concentration
Description of concentration	For the three months ended September 30, 2020, the Company had two clinics that represented 12%, and 17% of total revenue. For the three months ended September 30, 2019, the Company had no clinics that represented more than 10% of total revenue.	We have two vendors who represent 100% of purchased products that are sold for nine months 2020 and 2019. For the nine months ended September 30, 2020, the Company had three clinics that represented 11%, 12%, and 17% of total revenue. For the nine months ended September 30, 2019, the Company had no clinics that represented more than 10% of total revenue.

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Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($)	Nov. 16, 2020	Oct. 01, 2020
Monthly rent		$ 1,210
Lease beginning date		Nov. 01, 2020
Lease terms		1 year
GPB Debt Holdings II, LLC (GPB) [Member]
Principal amount	$ 5,000,000
Maturity date	Sep. 29, 2020
Conversion price per Share	$ 0.44
Description of new GPB note	The New GPB Note, which matures on September 30, 2023 (the “Maturity Date”), provides for cash interest at the rate of 8% per annum, which accrues and is payable monthly commencing April 1, 2021. In addition, the New GPB Note also provides for an annual payment of paid in kind interest at the rate of 11.5% for the period from October 1, 2020 through March 31, 2021, and at the rate of 3.0% per annum thereafter. The New GPB Note (including accrued and unpaid interest) may be prepaid, in whole or in part, at the option of the Company at any time prior to the Maturity Date, so long as a minimum of $200,000 is prepaid each time a repayment is made, upon thirty (30) days’ prior written notice; provided, however, that during such notice period, GPB may exercise its conversion rights described below with respect to the portion of the New GPB Note proposed to be prepaid. No success fee or other premium will be due in connection with an optional prepayment. In addition to optional prepayment, if on the last day of each calendar quarter prior to the Maturity Date or earlier repayment of the New GPB Note in full, available cash held by the Company in its and its subsidiaries’ bank accounts exceeds $1,000,000, after giving effect to all accruals and expenses accounted for in that calendar quarter, the Company shall make a mandatory prepayment to GPB of $200,000, which shall be applied to reduction of the outstanding principal amount of the New GPB Note.
GPB Debt Holdings II, LLC (GPB) [Member] | Exchange Agreement [Member]
Principal amount	$ 350,000
Principal payment	$ 1,000,000
GPB Debt Holdings II, LLC (GPB) [Member] | Exchange Agreement [Member] | Common Stock [Member]
Number of shares issued	3,206,525