ITEM 1A. RISK FACTORS
Although we have not yet acquired any clinics or otherwise commenced an active business, the following risk factors are expected to affect our business and the industry in which we intend to operate. Accordingly, when we refer to “our clinics” below, it is with reference to clinics that we intend to acquire, regardless of the level of ownership or clinics that are involved in joint ventures with us. The risks and uncertainties described below are not the only ones facing our Company. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also have an adverse effect on us. If any of the matters discussed in the following risk factors were to occur, our business, financial condition, results of operations, cash flows or prospects could be materially adversely affected.
Risks related to our business
We have not yet commenced substantive operations or earned revenue, and as such, our financial statements may not serve as an adequate basis to judge our future prospects and results of operations.
To date, we have been involved primarily in organizational activities and have not earned any revenues. As such, our financial statements may not provide a meaningful basis on which to evaluate our business. Moreover, we cannot assure you we will be able to implement our business plan and growth strategy successfully. We will continue to encounter risks and difficulties frequently experienced by companies at an early stage of development, which include a potential failure in:
●implementing the Protocol to pain management clinics in the United States;
●obtaining sufficient capital to acquire clinics in accordance with our business plan;
●maintaining adequate control of our expenses;
●maintaining the proprietary nature of the Protocol;
●implementing our marketing and acquisition strategies and adopting and modifying them as needed;
●anticipating and adapting to changing conditions in the health care and pain management industries; and
●anticipating and adapting to any changes in government regulation.
Our inability to manage successfully any or all of these risks may materially and adversely affect our business.
We are a holding company that will depend on cash flow from our wholly owned subsidiaries to meet our obligations, and any inability of our subsidiaries to pay us dividends or make other payments to us when needed could disrupt or have a negative impact on our business.
We are a holding company with no material assets other than our ownership interests in our wholly-owned subsidiaries, CPCC, through which we plan to implement our business plan, and IAG, for which we have no present plans. We will rely on dividends, advances, or other such distributions, from our clinics to our CPCC subsidiary and then to us for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. The ability of CPCC to make distributions to us will depend upon the profitability of the clinics we acquire, which will be subject to a number of business considerations, state and federal laws and in some case, the agreement between CPCC and the acquired clinic. We cannot provide any assurance that distribution of funds from CPCC to us will be adequate to satisfy our liquidity needs, and if we are not able to obtain sufficient funds from CPCC to pay our obligations as they become due, our business could be negatively impacted.
We may not be able to implement our business strategy successfully on a timely basis or at all.
Our future success depends, in large part, on our ability to implement our business strategy of acquiring clinics for delivery of the Protocol. Our ability to implement this growth strategy depends, among other things, on our ability to:
● enter into acquisition agreements with clinics we deem accretive to our business interests;
● increase the recognition of the Protocol; and
● expand and maintain delivery of the Protocol in the United States.
We may not be able to successfully implement our business strategy. Our operating results will be adversely affected if we fail to implement our strategy or if we invest resources in a strategy that ultimately proves unsuccessful.
Our business is substantially dependent on the efficacy of the physicians who work in our acquired clinics; any loss or reduction in the quality of the physician’s services will negatively impact our results of operations.
Our business depends on, among other things, the physicians who will work in our acquired clinics and the strength of our relationship with those physicians. If a physician leaves our clinic either upon or subsequent to our acquisition, or does not provide quality medical care or follow required professional guidelines at our clinic, or if the physician’s reputation is damaged during his tenure at our clinic, we may need to recruit a replacement physician. In such a case, the revenues generated in an acquired clinic will be negatively impacted during the time it takes us to recruit a replacement physician.
If we fail to acquire and develop clinics on favorable terms, our future growth and operating results could be adversely affected.
We plan to generate revenues and earnings by acquiring existing pain management clinics and augmenting their established treatment protocols with the Protocol, our own proprietary system for treating and managing chronic pain. The success of our business plan will be affected by our ability to identify suitable clinics for acquisition and our ability to negotiate and close on clinic acquisitions in a timely manner and on favorable terms. There can be no assurances that we will be successful in identifying additional clinics suitable for acquisition or that we will be able to close on clinic acquisitions in a timely manner and/or on terms favorable to us.
If we are unable to implement our growth strategy at our acquired clinics, our operating margins and profitability could be adversely affected.
We plan to increase revenues and earnings from the clinics we acquire by increasing the type and number of procedures performed and increasing the number of physicians performing procedures, consistent with the Protocol. In addition, we plan to obtain new or more favorable contracts with third party payors, increase the capacity of our clinics and increase patient and physician awareness of our clinics. Through this strategy we expect to increase the volume of procedures performed at our acquired clinics and result in higher revenues. However, procedure volume at our acquired clinics is susceptible to economic conditions, including high unemployment rates and other factors that may cause patients to delay or cancel previously planned procedures. As such, there can be no assurances that we will be successful at implementing our growth strategy at our acquired clinics.
If we are unable to manage the growth of our business through the acquisition of clinics our business and results of operations could be adversely affected.
At such time as we have acquired clinics, we may not be able to successfully integrate the operations of newly acquired clinics with our own, and we may not realize all or any of the expected benefits of acquiring new clinics as and when planned. The integration of operations of new clinics with our own will be complex, costly and time-consuming. We expect that the integration of the operations of new clinics will require significant attention from our senior management and will impose substantial demands on our operations and personnel, potentially diverting attention from other important pending projects. Therefore, we may not be able to successfully manage our growth within our budgetary expectations and anticipated timetable. Accordingly, we may fail to realize some or all of the anticipated benefits of acquiring new clinics, including increasing the scale of our operations, diversification, and cash flows and operational efficiency.
If we do not have sufficient capital resources to complete acquisitions and develop our clinics, our ability to implement our business plan could be adversely affected.
We will need capital to implement our business plan, and may seek to finance future clinic acquisitions and development projects through debt or equity financings. Disruptions to financial markets or other adverse economic conditions may adversely impact our ability to complete any such financing or the terms of any such financing may be unacceptable or unfavorable to us. To the extent that we undertake financings with our equity securities, our current shareholders will experience ownership dilution. To the extent we incur debt, we may have significant interest expense and may be subject to covenants in the related debt agreements that restrict the conduct of our business. No assurance can be given that we will be able to obtain financing necessary to implement our business plan or that the financing will be available on terms acceptable to us.
Since most medical clinics operate on a cash rather than an accrual basis, we may not be able to accurately determine the profitability or current assets of clinics that are acquisition prospects and pay too much for them which will adversely affect our profitability, diminish our tangible assets and increase our accounting costs.
We have observed that most of the financial statements of clinics that we have reviewed are prepared on a cash basis rather than on an accrual basis and that no information is available on the value or aging of Accounts Receivable or Accounts Payable. As a result, this information must be obtained through audits which will increase our accounting costs and, if the records are incomplete, may lead to incorrect estimates, overpayment for certain clinics and diminished asset value. In addition, all clinics operating on a cash basis will have to be converted to accrual accounting which will also lead to additional costs that could have an adverse effect on our profitability.
Implementation of the Protocol may not meet our expectations, and any such failure would adversely affect our ability to implement our business plan.
We anticipate that a material portion of our revenues will be derived from the introduction of the Protocol into acquired clinics and possibly through licensing the Protocol to other entities, such as hospitals. We can give no assurance that the Protocol will be widely accepted or that we will be able to receive enough, or any, funding from payors to introduce or sustain the Protocol in any given clinic, or at all. Because the Protocol is a new medical approach, it is possible that wide acceptance will never be attained which would have an adverse effect on our business, financial condition and results of operations.
If we are unable to secure CARF accreditation for our acquired clinics, our revenues, credibility and market acceptance may be adversely affected.
CARF is an organization that provides accreditation for medical rehabilitation, including pain management therapies. While CARF accreditation is voluntary, and the process for accreditation is rigorous and costly, we wish to secure accreditation for the clinics we acquire to demonstrate that a standardized service is available in all clinics that use the Protocol. If we fail to achieve accreditation for some or any of our clinics, our reputation may be adversely affected and we may have difficulty attracting a suitable number of patients or third party payors to generate additional revenues at our acquired clinics.
No clinical trials of the Protocol have been undertaken and, if such trials are completed, there is no assurance that the Protocol will demonstrate any comparative advantage to standard medical approaches.
The evidence for the effectiveness of the Protocol is derived from two preliminary studies and patient testimonials that have relied on subjective evaluations of pain relief by patients. Although we wish to undertake formal clinical trials and test the Protocol against standard medical approaches for pain relief using standardized methodology, there is no assurance that such clinical trials will ever take place due to the expense of conducting such trials. While we perceive advantages to the Protocol based upon our studies, clinical trials, if conducted, may not show any measurable advantage of the Protocol over standard medical approaches to pain care which could affect the marketability of the Protocol, and thus negatively impact on our ability to implement our business plan.
A lack of formal intellectual property protection for the Protocol may result in unauthorized use by physicians or clinics.
The Protocol is a trade secret and, without formal intellectual property (“IP”) protection, is vulnerable to unauthorized use. Although trade secret protection is often chosen as a means to protect IP, it leaves a company with few options to take action if a third party manages to reverse engineer or copy the trade secret. To protect our interests, we do not provide any information on the Protocol to third parties without a Non-Disclosure Agreement (“NDA”) in place. We intend to strengthen our IP protection options in due course with more rigorous NDAs as well as copyright protection. We also intend to evaluate patenting certain key procedures or apparatus related to the Protocol. However, we may not be able to support the expense of taking such steps and, even after we have taken all reasonable steps to protect our IP, it is still possible that unauthorized third parties will use our IP. If such unauthorized use of our IP does occur, our ability to stop such practices may be very limited and, if so, we will likely lose some potential revenues.
In order to treat patients, the Protocol requires extensive orientation and training of personnel, which may be beyond our capabilities, or unavailable.
The Protocol involves a number of different procedures, types of personnel, products, apparatus, supplements and medications. At this time, we only have our executive officers available to provide the training needed for a clinic to adopt the Protocol. To mitigate this problem, we may seek to establish a training center at a centrally-located clinic that has the resources to accommodate mandatory training courses. Also, we may run mandatory training programs in different centers across the United States to accommodate the needs of new clinics. However, the personnel needed to treat patients using the Protocol may not be available at a particular clinic. We believe we may need to engage the services of independent health care professionals to provide selected services in our acquired clinics until we are in a position to hire our own professionals. However, personnel needed to deliver the Protocol to patients may not be available in the area of our acquired clinics, which may lead to high travel and accommodation costs to have the necessary personnel available, which, in turn, could adversely affect our profitability.
If we are restricted from establishing pharmacies associated with our clinics, there will be an adverse affect on our revenues and profits.
We expect a significant portion of our revenues to come from pharmacies associated with our clinics. Although one of the clinics with which we are negotiating acquisition terms does include an associated pharmacy, we can provide no assurance that the federal, state or municipal regulations will allow a pharmacy to be established at any particular clinic we acquire in the future. If we are unable to open pharmacies at our clinics, our revenue and profit potential will be adversely affected.
Regulators at the federal and state level are monitoring and restricting the prescribing and use of pain medications which could have an adverse effect on our growth.
State and federal regulators are enforcing new restrictions to reduce the amount of abuse of strong and addictive pain medications, such as opiates. In some states, such as Florida, a moratorium on new licenses for pain management clinics has been put in place in an attempt to stop the illegal distribution of such medications. Such restrictions on the licensing of new clinics could have a material effect on our business because a significant component of our planned growth is expected to come from expanding our clinics into new locations within a geographical area.
Risks specific to our industry
The healthcare regulatory and political framework is uncertain and evolving.
Healthcare laws and regulations may change significantly in the future which could adversely affect our financial condition and results of operations. We will continually monitor these developments and modify our operations from time to time as the legislative and regulatory environment changes.
In March 2010, President Barack Obama signed one of the most significant health care reform measures in decades providing healthcare insurance for approximately 30 million more Americans. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “ACA”), substantially changes the way health care is financed by both governmental and private insurers, including several payment reforms that establish payments to hospitals and physicians based in part on quality measures, and may significantly impact our industry. We are unable to predict what effect the ACA or other healthcare reform measures that may be adopted in the future will have on our business.
The healthcare industry is highly regulated, and government authorities may determine that we have failed to comply with applicable laws or regulations.
The healthcare industry and physicians’ medical practices, including the healthcare and other services that we and our affiliated physicians intend to provide, are subject to extensive and complex federal, state and local laws and regulations, compliance with which will impose substantial costs on us. Of particular importance are the provisions summarized as follows:
●federal laws (including the federal False Claims Act) that prohibit entities and individuals from knowingly or recklessly making claims to Medicare and other government programs that contain false or fraudulent information or from improperly retaining known overpayments;
●a provision of the Social Security Act, commonly referred to as the “anti-kickback” law, that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration, in cash or in kind, in return for the referral or recommendation of patients for items and services covered, in whole or in part, by federal healthcare programs, such as Medicare;
●a provision of the Social Security Act, commonly referred to as the Stark Law, that, subject to limited exceptions, prohibits physicians from referring Medicare patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including a compensation arrangement) with the entity;
●similar state law provisions pertaining to anti-kickback, fee splitting, self-referral and false claims issues, which typically are not limited to relationships involving federal payors;
●provisions of HIPAA that prohibit knowingly and willfully executing a scheme or artifice to defraud a healthcare benefit program or falsifying, concealing or covering up a material fact or making any material false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services;
●state laws that prohibit general business corporations from practicing medicine, controlling physicians’ medical decisions or engaging in certain practices, such as splitting fees with physicians;
It is possible that future legislation and regulation, aside from the ACA, and the interpretation of existing and future laws and regulations could have a material adverse effect on our ability to operate under Medicare and Medicaid and to continue to serve and attract new providers and patients. In addition, we believe that our business will continue to be subject to increasing regulation, the scope and effect of which we cannot predict. See Item 1. Business-“Government Regulation.”
We may in the future become the subject of regulatory or other investigations or proceedings, and our interpretations of applicable laws, rules and regulations may be challenged.
Regulatory authorities or other parties may assert that our arrangements with our affiliated professional contractors constitute fee splitting or the corporate practice of medicine and seek to invalidate these arrangements, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our common stock. Regulatory authorities or other parties also could assert that our relationships, including fee arrangements, among our affiliated professional contractors, hospital clients or referring physicians violate the anti-kickback, fee splitting or self-referral laws and regulations or that we have submitted false claims or otherwise failed to comply with government program reimbursement requirements. Such investigations, proceedings and challenges could result in substantial defense costs to us and a diversion of management’s time and attention. In addition, violations of these laws are punishable by monetary fines, civil and criminal penalties, exclusion from participation in government-sponsored healthcare programs, and forfeiture of amounts collected in violation of such laws and regulations, any of which could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price of our common stock.
Our records and submissions to funding agencies may contain inaccurate or unsupportable coding which could cause us to overstate or understate our revenue and subject us to various penalties.
A major component of the regulatory environment is the interpretation of billing procedures established by the American Medical Association and provided in the Current Procedural Terminology (“CPT”) code set. The CPT code set describes medical, surgical, and diagnostic services and is designed to communicate uniform information about medical services and procedures among physicians, coders, patients, accreditation organizations, and payors for administrative, financial, and analytical purposes. CPT coding is similar to the International Statistical Classification of Diseases and Related Health Problems (“ICD”), a medical classification list by the World Health Organization except that CPT identifies the services rendered rather than the diagnosis on the claim. The 9th revision of the ICD (“ICD-9”) describes approximately 14,000 procedures, while the 10th revision (“ICD-10”), when implemented, will describe about 70,000 procedures. Inaccurate or unsupportable coding, inaccurate records for patients and erroneous claims could result in inaccurate fee revenue being reported. Such errors are subject to correction or retroactive adjustment in later periods and may be reflected in financial statements for periods subsequent to the period in which the revenue was recorded. We may also find that we are required to refund a portion of the revenue that we received, which, depending on its magnitude, could damage our relationship with the subject funding agency and have a material adverse effect on our results of operations or cash flows.
The Centers for Medicare and Medicaid Services (“CMS”) has expanded the pilot recovery audit contractor (“RAC”) program to a permanent nationwide program. RACs are private contractors contracting with CMS to identify overpayments and underpayments for services through post-payment reviews of claims submitted by Medicare and Medicaid providers. The Healthcare Reform Acts expands the RAC program’s scope to include managed Medicare and to include Medicaid claims by requiring all states to establish programs to contract with RACs. All states were required to implement Medicaid RAC programs by January 1, 2012. In addition, CMS employs Medicaid Integrity Contractors (“MICs”) to perform post-payment audits of Medicaid claims and identify overpayments. The Healthcare Reform Acts increases federal funding for the MIC program for federal fiscal year 2011 and later years. In addition to RACs and MICs, the state Medicaid agencies and other contractors have increased their review activities. MICs are assigned to five geographic regions and have commenced audits in states assigned to those regions. It is possible that our clinics will receive letters from RAC auditors requesting repayment of alleged overpayments for services and will incur expenses associated with responding to and appealing these RAC requests, as well as the costs of repaying any overpayments. Demands for repayments can occur even if a clinic is acquired by means of an asset transfer. If we have inadequate resources to enable us to dispute and overturn such demands for overpayments, it is possible that such payments will have to be returned which could have a material adverse effect on our financial condition and results of operations.
We intend to use third party coding and billing agencies but there is no assurance that such agencies will not make coding and billing errors causing us to understate or overstate revenues, subjecting us to penalties and demands for refunds or leading to attempts to recover funds.
Interpretation of the correct billing procedures mandated by the ICD-9 and the ICD-10, when implemented, requires specific expertise. It is our intention to employ the services of qualified, third party coding and billing services to maximize billing revenues. There are a number of such third party agencies and their level of expertise and experience varies. Regardless of which agency we may use, there is no assurance that correct codes will be used which could lead to a significant reduction in revenues that may be properly claimed or a significant overpayment to us from the funding agencies. In the case of overpayments, the funding agencies will most likely demand refunds and may impose penalties which could have a material and adverse effect on our business and results of operations. In the case of underpayments, we may attempt to resubmit the billings to recover the revenues that were not claimed. There could be a substantial cost to undertake this effort which would affect our projected profitability. There is no assurance that we would be successful in receiving further payments.
If we acquire a clinic that has made coding and billing errors prior to our ownership, we would most likely be liable for those errors that led to overpayments and may be subject to penalties as well as being required to provide refunds.
Historical coding and billing errors made by a clinic prior to our acquisition, even in the case of solely an asset acquisition, may require us to provide refunds to payors and possibly pay penalties. In the case of underpayments, it is very unlikely that we would be able to collect funds that were owed to the clinic prior to our acquisition. In order to mitigate this risk, we intend to employ consultants at the due diligence stage of acquiring a clinic to conduct a compliance audit. There can be no assurance that any such compliance audit will disclose any future liabilities for overpayments that any of our clinics may have incurred.
Changes in the rates or methods of third-party reimbursements for medical services could result in reduced demand for our services or create downward pricing pressure, which would result in a decline in our revenues and harm to our financial position.
Third-party payors such as Medicare, Tricare and commercial health insurance companies, may change the rates or methods of reimbursement for the services we plan to provide and could have a significant negative impact on those revenues. At this time, we cannot predict the impact of rate reductions will have on our future revenues or business. Moreover, patients on whom we will depend for the majority of our medical clinic revenues generally rely on reimbursement from third-party payors. If our patients receive decreased reimbursement, this could result in a reduced demand for our services or downward pricing pressures, which could have a material impact on our financial position.
Furthermore, the Budget Control Act of 2011 (“BCA”) requires automatic spending reductions of $1.2 trillion for federal fiscal years 2013 through 2021, minus any deficit reductions enacted by Congress and debt service costs. We are unable to predict how these spending reductions will be structured or how they would impact us, what other deficit reduction initiatives may be proposed by Congress or whether Congress will attempt to suspend or restructure the automatic budget cuts. We can give you no assurances that future changes to reimbursement rates by government healthcare programs, cost containment measures by private third-party payors or other factors affecting payments for healthcare services will not adversely affect our future revenues, operating margins or profitability.
Managed care organizations may prevent their members from using our services which would cause us to lose current and prospective patients.
Healthcare providers participating as providers under managed care plans may be required to refer medical services to specific medical clinics depending on the plan in which each covered patient is enrolled. These requirements may inhibit their members from using our medical services in some cases. The proliferation of managed care may prevent an increasing number of their members from using our services in the future which would cause our revenues to decline.
Stark Law prohibition on physician referrals may be interpreted so as to limit our prospects.
The Ethics in Patient Referral Act of 1989, as amended (the “Stark Law”), is a civil statute that generally (i) prohibits physicians from making referrals for designated health services to entities in which the physicians have a direct or indirect financial relationship and (ii) prohibits entities from presenting or causing to be presented claims or bills to any individual, third party payer, or other entity for designated health services furnished pursuant to a prohibited referral. Under the Stark Law, a physician may not refer patients for certain designated health services to entities with which the physician has a direct or indirect financial relationship, unless allowed under an enumerated exception. Under the Stark Law, there are numerous statutory and regulatory exceptions for certain otherwise prohibited financial relationships. A transaction must fall entirely within an exception to be lawful under the Stark Law.
The Stark Law contains significant civil sanctions for violations, including denial of payment, refunds of amounts collected in violation of the Stark Law and exclusion from Medicare programs. In addition, OIG may impose a penalty of $10,000 for submitting an illegal claim or not refunding such a claim on a timely basis and a civil monetary penalty of up to $100,000 for each circumvention arrangement or scheme.
We believe that any referrals between or among the Company, the physicians providing services and the facilities where procedures are performed will be for services compliant under the Stark Law. If these arrangements are found to violate the Stark Law, we may be required to restructure such services or be subject to civil or criminal fines and penalties, including the exclusion of our Company, the physicians, and the facilities from the Medicare programs, any of which events could have a material adverse effect on our business, financial condition and results of operations.
Some states have enacted statutes, similar to the federal Anti-Kickback Statute and Stark Law, applicable to our operations because they cover all referrals of patients regardless of the payer or type of healthcare service provided. These state laws vary significantly in their scope and penalties for violations. Although we will endeavor to structure our business operations to be in material compliance with such state laws, authorities in those states could determine that our business practices are in violation of their laws. This could have a material adverse effect on our business, financial condition and results of operations.
Fee-splitting prohibitions in some states may be interpreted so as to limit our prospects.
Many states prohibit medical professionals from paying a portion of a professional fee to another individual unless that individual is an employee or partner in the same professional practice. If we violate a state’s fee-splitting prohibition, we may be subject to civil or criminal fines, and the physician participating in such arrangements may lose his or her licensing privileges. Many states do not offer clear guidance on what relationships constitute fee-splitting, particularly in the context of providing management services for doctors. We have endeavored to structure our business operations in material compliance with these laws. However, state authorities could find that fee-splitting prohibitions apply to our business practices in their states. If any aspect of our operations were found to violate fee-splitting laws or regulations, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Facility licensure requirements in some states may be costly and time-consuming, limiting or delaying our operations.
State Departments of Health may require us to obtain licenses in the various states in which we have our pain care clinics. We intend to obtain the necessary material licensure in states where licensure is required. However, not all of the regulations governing the need for licensure are clear and there is limited guidance available regarding certain interpretative issues. Therefore, it is possible that a state regulatory authority could determine that we are improperly conducting business operations without a license in that state. This could subject us to significant fines or penalties, result in our being required to cease operations in that state or otherwise have a material adverse effect on our business, financial condition and results of operations.
Health Insurance Portability and Accountability Act compliance is critically import to our continuing operations.
In December 2000, the U.S. Department of Health and Human Services (“DHHS”) released final health privacy regulations implementing portions of the Administrative Simplification Provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). These final health privacy regulations were effective in April 2003, for providers that engage in certain electronic transactions, including the submission of claims for payment. Additionally, DHHS published final standards to protect the security of health-related information in February 2003. Finally, in August 2009 DHHS published interim final breach notification regulations implementing section 13402 of the Health Information Technology for Economic and Clinical Health (“HITECH”) Act. The HIPAA privacy and security regulations and the HITECH Act extensively regulate the use and disclosure of individually identifiable health-related information. Our clinics and physicians will be covered entities under HIPAA if those entities provide services that are reimbursable under Medicare or other third-party payers. Although the covered health care providers themselves are primarily liable for HIPAA compliance, as a “business associate” to these covered entities we are bound indirectly to comply with the HIPAA privacy regulations, and we are directly bound to comply with certain of the HIPAA security regulations. Although we cannot predict the total financial or other impact of these privacy and security regulations on our business, compliance with these regulations could require us to incur substantial expenses, which could have a material adverse effect on our business, financial condition and results of operations. In addition, we will continue to remain subject to any state laws that are more restrictive than the privacy regulations issued under the Administrative Simplification Provisions.
If we are unable to effectively compete for physicians, contracts, patients and strategic relationships, our business would be adversely affected.
The healthcare business is highly competitive. We will be competing with other facilities, such as hospitals and private clinics, for physicians to staff our clinics, patients and to obtain contracts with funding agencies. In some of the markets in which we plan to operate, there are shortages of physicians in our targeted specialty. In addition, physicians, hospitals, payors and other providers may form integrated delivery systems that restrict physicians who may otherwise be willing to treat certain patients at our clinics on a part-time basis outside of their main employment. These restrictions may impact our clinics and the medical practices of physicians with whom we may otherwise enter into service agreements. Some of our competitors may have greater resources than we do, including financial, marketing, staff and capital resources, have or may develop new technologies or services that are attractive to physicians or patients, or have established relationships with physicians and payors.
We may also be competing in the future with public and private companies in the development and acquisition of clinics. Further, many physician groups develop clinics without a corporate partner. We can give you no assurances that we will be able to compete effectively in any of these areas.
Competition for the acquisition of new clinics and other factors may impede our ability to acquire clinics and may inhibit our growth.
We anticipate that the future growth of our business will be dependent upon our successful acquisition of clinics. The success of this strategy depends upon our ability to identify suitable acquisition candidates, reach agreements to acquire these clinics, obtain necessary financing on acceptable terms and successfully integrate the operations of these businesses. In pursuing acquisition opportunities, we may compete with other companies that have similar growth strategies. Some of these competitors are larger and have greater financial and other resources than we have. This competition may prevent us from acquiring clinics that could generate substantial revenues for our business.
If regulations or regulatory interpretations change, we may be obligated to buy out interests of physicians who retain equity in any clinics in which we have the majority interest.
We expect that we will acquire complete ownership of most of the clinics that we choose to purchase either through share or asset purchases although in some cases, the selling physician or physicians may retain a minority interest. If certain regulations or regulatory interpretations change, we may be obligated to purchase some or all of the non-controlling interests of the physician partners. The regulatory changes that could trigger such obligations include changes that:
●make the referral of Medicare and other patients to our clinics by physicians affiliated with us illegal;
●create the substantial likelihood that cash distributions from limited liability companies to the affiliated physicians will be illegal; or
●cause the ownership by the physicians of interests in limited liability companies to be illegal.
The cost of repurchasing these non-controlling interests would be substantial if a triggering event were to result in simultaneous purchase obligations at a substantial number or at all of our clinics. We anticipate that the purchase price to be paid in such event would be determined by a predefined formula set out in a shareholders’ agreement, which also provide for the payment terms, generally over a period of time. There can be no assurance, however, that our existing capital resources would be sufficient for us to meet the obligations, if they arose, to purchase these non-controlling interests held by physicians. The determination of whether a triggering event has occurred generally would be made by the concurrence of our legal counsel and counsel for the physician partners or, in the absence of such concurrence, by a nationally recognized law firm having an expertise in healthcare law jointly selected by both parties. Such determinations therefore would not be within our control. The triggering of these obligations could have a material adverse effect on our financial condition and results of operations. While we will ensure, to the best of our abilities that physician ownership of an interest in any clinic is in compliance with applicable laws, we can give no assurances that legislative or regulatory changes would not have an adverse impact on us. From time to time, the issue of physician ownership in clinics is considered by some state legislatures and federal and state regulatory agencies.
Risks Related to Our Securities
Our stock price may be volatile or may decline regardless of our operating performance, and you may lose part or all of your investment.
While there is no current market for our common stock, when a market develops, the market price of our common stock may fluctuate widely in response to various factors, some of which are beyond our control, including:
● market conditions or trends in the healthcare industry or in the economy as a whole;
● actions by competitors;
● actual or anticipated growth rates relative to our competitors;
● the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;
● economic, legal and regulatory factors unrelated to our performance;
● any future guidance we may provide to the public, any changes in such guidance or any difference between our guidance and actual results;
● changes in financial estimates or recommendations by any securities analysts who follow our common stock;
● speculation by the press or investment community regarding our business;
● litigation;
● changes in key personnel; and
● future sales of our common stock by our officers, directors and significant shareholders.
In addition, the over-the-counter markets in which we anticipate our common stock being quoted, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These broad market fluctuations may materially affect our stock price, regardless of our operating results. When a trading market begins, the price at which investors purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, these factors may make it more difficult or impossible for you to sell our common stock for a positive return on your investment. In the past, shareholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.
Shares of our common stock when trading, may lack a significant trading market, which could make it more difficult for an investor to sell our common stock.
While we were recently approved for trading by the Financial Industry Regulatory Authority (“FINRA”), shares of our common stock are not currently trading or quoted in the over-the-counter market. There is no assurance that an active trading market in our common stock will develop, or if such a market develops, that it will be sustained. In addition, there is a greater chance for market volatility for securities quoted in the over-the-counter markets as opposed to securities traded on a national exchange. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the absence of consistent administrative supervision of “bid” and “ask” quotations and generally lower trading volume. As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock, or to obtain coverage for significant news events concerning us, and our common stock could become substantially less attractive for investment by financial institutions, as consideration in future capital raising transactions or for other purposes.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.
The SEC has adopted Rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that (i) has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, or (ii) is not registered on a national securities exchange or listed on an automated quotation system sponsored by a national securities exchange. For any transaction involving a penny stock, unless exempt, Rule 15g-9 of the Exchange Act requires:
●that a broker or dealer approve a person’s account for transactions in penny stocks; and
●the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
●obtain financial information and investment experience objectives of the person; and
●make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
●sets forth the basis on which the broker or dealer made the suitability determination; and
●attests that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Due to the requirements of the penny stock rules, many broker-dealers have decided not to trade penny stocks. As a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. Moreover, if our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
Future sales of shares of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock in the market after our stock commences trading. In addition, if our significant shareholders sell a large number of shares, or if we issue a large number of shares, the market price of our stock could decline. Any issuance of additional common stock, or warrants or options to purchase our common stock, by us in the future would result in dilution to our existing shareholders. Such issuances could be made at a price that reflects a discount or a premium to the then-current trading price of our common stock. Moreover, the perception in the public market that shareholders might sell shares of our stock or that we could make a significant issuance of additional common stock in the future could depress the market for our shares. These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
We could issue additional common stock, which might dilute the book value of our common stock.
Our Board of Directors has authority, without action or vote of our shareholders, to issue all or a part of our authorized but unissued shares. Our certificate of incorporation, as amended, authorizes the issuance of up to 100,000,000 shares. As of December 31, 2013 there were 45,000,000 shares of our common stock outstanding. Although we have no commitments as of the date of this report to issue our securities, we may issue a substantial number of additional shares of our common stock or debt securities to complete a business combination or to raise capital. Such stock issuances could be made at a price that reflects a discount or a premium from the then-current trading price of our common stock. In addition, in order to raise capital, we may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. These issuances would dilute your percentage ownership interest, which would have the effect of reducing your influence on matters on which our shareholders vote, and might dilute the book value of our common stock. You may incur additional dilution if holders of stock options and warrants, whether currently outstanding or subsequently granted, exercise their options or warrants to purchase shares of our common stock.
We do not anticipate paying dividends in the foreseeable future, and, accordingly, any return on investment may be limited to the value of our common stock.
We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the Board of Directors may consider relevant. We intend to follow a policy of retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business. If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.
Our largest shareholder has significant control over our common stock and may be able to control our Company indefinitely.
Our largest shareholder currently has beneficial ownership of approximately 70% of our outstanding common stock. This significant stockholder therefore has considerable influence over the outcome of all matters submitted to our stockholders for approval, including the election of directors and the approval of significant corporate transactions.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
As of December 31, 2013, there were no outstanding or unresolved staff comments on the company.
ITEM 2.
ITEM 2. PROPERTIES
We have office services provided to us at 48 Wall Street, New York, NY 10005. We have no other properties but are actively pursuing the acquisition of a number of clinics that specialize in the treatment and management of chronic pain.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
At the time of this report, we are not involved in any legal proceedings.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
PART II
ITEM 5.
ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) Market Information. As of December 31, 2013 our Common Stock was not trading on any public trading market or stock exchange. No assurance can be given that any market for our Common Stock will ever develop. However, we were recently approved for trading by the Financial Industry Regulatory Authority (“FINRA”) under the symbol, OCAQ, and expect to have our shares commence trading on the OTCQB in the near future.
(b) Unregistered Sales of Equity Securities. On October 18, 2013, pursuant to the Exchange Agreement, we issued 31,500,000 shares of our restricted common stock to Champion Toronto, which was the shareholder of CPCC, in exchange for all of the outstanding capital stock of CPCC. The issuance of our common stock to Champion Toronto was exempt from the registration requirements of the Securities Act pursuant to Section 4(2). These shares of our common stock have not been registered under the Securities Act and may not be offered or sold absent registration or an applicable exemption from registration requirements. Also effective on October 18, 2013, concurrent with the completion of the Exchange Agreement, 8,500,000 of our restricted common shares were issued to 11 individuals for past services rendered.
(c) Holders. Our authorized capital consists of 100,000,000 shares of common stock, par value of $0.0001 per share. As of December 31, 2013, there were 45,000,000 shares of Common Stock issued and outstanding held by 51 record holders. No other classes of shares are issued or authorized.
(d) Dividend Policy
We have not declared or paid any cash dividends on our Common Stock and do not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on our earnings, if any, our capital requirements and financial condition and such other factors as the Board of Directors may consider.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
This item is not required for smaller reporting companies.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Consolidated Financial Statements and the related notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements. Please see the explanatory note concerning “Forward-Looking Statements” in Part I of this Annual Report on Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.
We intend to acquire equity ownership or assets of medical clinics that specialize in the treatment and management of chronic pain.
The acquisition of clinics depends on the availability of funding and we have not yet secured sufficient funding. On January 31, 2014, we entered into a Corporate Finance Engagement with Xnergy Financial LLC a New York and California based company, to secure the financing required for us to accomplish the goals set forth above. Xnergy Financial is an international investment banking firm providing debt and equity, merger and acquisition and financial advisory services to emerging growth and middle market companies. More information on Xnergy Financial is available at http://www.xnergy.biz/.
We are interested in acquiring clinics which are generating revenues and have either positive cash flow or are undervalued and have significant turnaround potential in exchange for cash and/or our securities. We currently have Memoranda of Understanding with four such clinics and have identified approximately ten additional clinics that are prospects for acquisition. We have not yet actively sought out such clinics but have had the prospects brought to our attention by business brokers and word of mouth. We will attempt to build a critical mass of clinics within selected geographical areas so that we can achieve efficiencies in administration, purchasing, opportunities for personnel and other activities that will benefit from having a number of clinics in close proximity.
The structure of our acquisitions are expected to vary. We intend to acquire 100% of a clinic’s equity but, depending on federal, state and municipal laws governing the ownership of medical clinics, we may enter into joint venture or partnership agreements in which we own less than 100% of a particular clinic or even be in a minority position. We may also enter into agreements to sub-license the Protocol to both private and public sector clinics and have no ownership.
We anticipate that the acquisition of clinics will be complex, risky and expensive in the early stages. As we gain experience, the risks and expenses may be mitigated but, due to the highly fragmented nature of the market, each acquisition will present unique opportunities and problems. Physicians may have personal attachments to their clinics and overvalue them. Accounting records, which generally do not adhere to GAAP, may be incomplete, inaccurate and poorly organized which will lead to complex and expensive audits and conversion to GAAP. Detailed and costly due diligence will be needed and conducted with the assistance of independent consultants to ensure the accuracy and validity of billing codes for all procedures performed at every clinic since payors may demand reimbursement, even after an asset transfer, if there are errors. Retiring physicians may be difficult to replace and physicians that stay with their clinics may not work well under the requirements of a public company. The same problems of replacing or working with key employees are also expected to occur which would add to the costs of human resources management. Integrating the operations of individual clinics, adopting best practices and new technologies, securing CARF accreditation and building a national brand will be complex and difficult, especially if any physicians in charge of clinics are resistant to change. Existing and changing legislation at the federal, state and municipal levels will require constant due diligence and updating to ensure that any particular clinic is in compliance with all applicable laws. The amount of scrutiny and restrictions that medical clinics and physicians are subjected to will also increase the burden and expense of compliance. Compliance with securities laws and regulations will affect each acquisition since it is our intention to offer our securities for all or part of each acquisition. The owners of the clinics may be required to incur significant legal and accounting costs in connection with the acquisition of a clinic, including the costs of providing information for SEC filings, agreements and related reports and documents. The Securities Exchange Act of 1934 (the “34 Act”), specifically requires that any merger or acquisition candidate comply with all applicable reporting requirements, which include providing audited financial statements to be included within the numerous filings. Certain clinic owners may refuse to comply and not proceed with a transaction even if we offer to bear the cost and deduct that from the purchase price. Other unforeseen obstacles may also inhibit or prohibit any acquisition at any time and even require divestment of certain clinics.
The analysis of new acquisition prospects will be undertaken by, or under the supervision of, our President and COO who are not professional business analysts. To assist management with acquisitions, we will engage the services of consultants and advisors in addition to our legal counsel and accountants to evaluate such information as the billing practices, medical procedures and personnel. We will concentrate on identifying preliminary prospective business opportunities which may be brought to our attention through business brokers, word of mouth, direct solicitation of clinic owners, attending conferences or other referrals. In analyzing prospective clinic acquisitions we will consider such matters as the availability of required personnel, financial resources, working capital and other financial requirements, history of operations, prospects for the future, nature of present and expected competition, the quality and experience of management services which may be available and the depth of that management, specific risk factors, the potential for growth or expansion, existing and expected profitability, the perceived public recognition of services and name identification and other relevant factors. We will conduct site visits and meet personally with the owners, physicians, management and key personnel of each clinic and, to the extent possible, require written reports. We will not acquire any clinic for which audited financial statements cannot be obtained within a reasonable period of time after closing of the proposed transaction.
Any merger or acquisition completed by us may have a significant dilutive effect on the percentage of shares issued by us.
We will participate in an acquisition only after the negotiation and execution of appropriate written agreements. Although the terms of such agreements cannot be predicted, generally such agreements will require specific representations and warranties by all of the parties, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by each of the parties prior to and after such closing, will outline the manner of bearing costs, including costs associated with our attorneys and accountants, will set forth remedies on default and will include miscellaneous other terms and will include provisions for non-competition, non-disclosure and non-solicitation.
As stated above, we will not acquire or merge with any entity which cannot provide independent audited financial statements within a reasonable period of time after closing of the proposed transaction. We are subject to all of the reporting requirements included in the 34 Act. Included in these requirements is our affirmative duty to file independent audited financial statements as part of our Form 8-K to be filed with the Securities and Exchange Commission upon consummation of a merger or acquisition, as well as our audited financial statements included in our annual report on Form 10-K (or 10-KSB, as applicable). If such audited financial statements are not available at closing, or within time parameters necessary to insure our compliance with the requirements of the 34 Act, or if the audited financial statements provided do not conform to the representations made by the clinic to be acquired in the closing documents, the closing documents may provide that the proposed transaction will be voidable, at the discretion of the present management of the Company.
Sources of revenues
At the time of this report, we have no revenues but after we complete an acquisition of at least one clinic we do expect to be generating revenues.
Critical Accounting Policies
Related parties
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a Black-Scholes option pricing model, assuming maximum value, in accordance with ASC 815-15 “Derivative and Hedging” to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Results of Operations
There were no operations prior to the date of this report. We are showing a loss of $781,815. Assets are $384 cash deposited with our subsidiary, Champion Pain Care Corp. in BMO Bank of Montreal. Liabilities are $819,236 and we are showing stockholders’ deficit of $818,852.
Year Ended December 31, 2013
Net Sales
We had no sales for either period.
Cost of sales
We had no cost of sales for either period.
Gross Profit or Loss
We had no gross profit or loss for either period.
Operating Expenses
For the period from January 31, 2013 (inception) through December 31, 2013, operating expenses of $781,815 were incurred. These expenses consisted of $59,914 for accounting, audit and legal fees. Legal fees included the costs for assisting us with the Exchange Agreement dated October 18, 2013 and the Form 8-K filed on October 23, 2013, reviewing information required by Spartan Securities Group Ltd. to submit a Form 15c2-11 to the Financial Industry Regulatory Authority (“FINRA”) on our behalf, preparing investment documents and general legal counsel. Under the Services Agreement between CPCC and Champion Toronto, services provided by Champion Toronto included completing the Exchange Agreement, the Form 8-K dated October 23, 2013, submission of the Form 15c2-11 to FINRA, evaluating acquisition prospects, preparation and negotiation of Memoranda of Understanding (“MoU”) with medical clinics, due diligence investigations of medical clinics under MoU, preparing marketing materials and financial projections for prospective investors participating in discussions with prospective investors and for fulfilling our general administrative requirements.
Net Loss
We had a net loss of $781,815 for the year ended December 31, 2013.
Liquidity and Capital Resources
Cash and cash equivalents at December 31, 2013 were $384. As of December 31, 2013 we had working capital deficit of $818,852.
We issued convertible debentures for a total of $47,690, which is also the amount outstanding as of December 31, 2013.
No warrants or options were issued from January 31, 2013 (inception) through December 31, 2013.
We are actively looking for either equity or debt financing or both to settle our current and future liabilities and to accomplish our plans but there is no assurance that we will be able to do so.
Commitments
We do not have any commitments which are required to be disclosed as of December 31, 2013.
Off-Balance Sheet Arrangements
As of December 31, 2013, we are not aware of any off-balance sheet transactions requiring disclosure.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This item is not required for smaller reporting companies.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Financial Statements below, beginning on page.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On May 17, 2013, the Board of Directors of OICco Acquisition I, Inc.. (the “Company”) terminated the engagement of Sam Kan & Company (“SKC”) as the Company’s independent registered accounting firm. This action effectively dismissed SKC as the Company’s independent registered accounting subsequent to the fiscal year ending December 31, 2011.
On May17, 2013, the Company’s Board of Directors appointed Malone Bailey LLP (“Malone Bailey”) as the Company’s new independent registered accounting firm. During the Company’s two most recent fiscal years and through December 31, 2013, neither the Company nor anyone acting on the Company’s behalf consulted Malone Bailey with respect to any of the matters or reportable events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our CEO, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, the CEO concluded that as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2013, our internal control over financial reporting is not effective based on these criteria. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Based on that assessment, our management has determined that as of December 31, 2013, the Company’s internal control over financial reporting were not effective for the purposes for which it is intended. Specifically, management’s evaluation was based on the following material weaknesses, which existed as of December 31, 2013:
●There is a lack of segregation of duties necessary for a good system on internal control due to insufficient accounting staff due to the size of the Company.
●Management and accounting staffs lack qualifications and training to fulfill their assigned accounting and reporting functions.
●There is a lack of controls related to multiple levels of review and overall supervision over financial reporting and related financial statements disclosures.
Prior to the next year end, the Company intends to hire a full time CFO and additional accounting personnel who will institute controls regarding the assignment of authority and responsibility, consistent policies and procedures, monitoring of controls and adequate disclosure controls.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth information concerning our officers and directors as of December 31, 2013.
Name Position Age Period of Service(1)
Terrance Owen CEO and Director October 18, 2013 to present
Jack Fishman President and Director October 18, 2013 to present
Emil Schiller COO and Director October 18, 2013 to present
Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. Each executive officer is a full time employee. Our directors hold office for one-year terms or until their successors have been elected and qualified. There are no family relationships between any of our directors, executive officers or other key personnel and any other of our directors, executive officers or key personnel. There are no arrangements or understandings between any of our directors or executive officers and any other persons pursuant to which such director or executive officer was selected in that capacity.
BACKGROUND OF DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Terrance Owen, CEO and Director
Dr. Owen obtained a BSc (Honours) in Biology from the University of Victoria in1968, a MSc in Biology from the University of New Brunswick in 1970, a PhD in Zoology from the University of British Columbia in 1974 and a MBA from Simon Fraser University, British Columbia in 1991. From 2000 to 2013, Dr. Owen was the President, CEO & Director of ALDA Pharmaceuticals Corp. and serves as a Director and on the audit committees of a number of other public companies that are listed on the TSX Venture Exchange. From December, 1980 to April 2002, Dr. Owen was the President of Helix Biotech ULC, a laboratory providing DNA identity testing services for paternity, immigration and forensic cases. He was the President and a director of Helix BioPharma Corp. from July, 1995 to June, 1998. Dr. Owen has been advising Champion Toronto since April, 2012 and was appointed as our CEO in July, 2013.
Jack Fishman, President and Director
Mr. Fishman is one of our co-founders and leads the development and the integration of corner office strategy to front line solutions. Mr. Fishman has a successful 22-year career track record of business growth, innovation and experience in general management, sales and marketing. He has provided strategic leadership for a diverse range of major corporations and has helped develop and launch new consumer award winning business initiatives for Snap-On-Tools and Honda. He is often sought out for keynote speeches at marketing conferences, most recently the National Public Relations Conference. He has been with Champion Toronto since its formation in and was appointed as our President and as a Director on our incorporation date.
Emil Schiller, COO and Director
Mr. Schiller is a co-founder of the Company. Under his leadership, his operational and team building programs have benefited a number of companies. Mr. Schiller is responsible for financial, operational, planning and distribution systems. Mr. Schiller is a seasoned executive with more than 22 years of international business experience. He has a broad range of high-level management experience within several industries. He has an extensive business background, having initiated several culture change initiatives, including the introduction of quality improvement programs to ensure consistent delivery of standards of excellence for major retail chains across North America. He has also been with Champion Toronto since its formation in and was appointed as our COO and as a Director on our incorporation date.
Involvement in certain legal proceedings
During the past ten years, none of our directors or executive officers has been:
● the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
● convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
● subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
● found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, that has not been reversed, suspended, or vacated;
● subject of, or a party to, any order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of a federal or state securities or commodities law or regulation, law or regulation respecting financial institutions or insurance companies, law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
● subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
None of our directors, executive officers or affiliates, or any beneficial owner of 5% or more of our common stock, or any associate of such persons, is an adverse party in any material proceeding to, or has a material interest adverse to, us or any of our subsidiaries.
Director Independence
Our Board of Directors is currently comprised of three directors, Dr. Owen, Mr. Fishman and Mr. Schiller, none of whom qualify as “Independent” directors for the purposes of the NASDAQ listed company standards currently in effect and all applicable rules and regulations of the SEC.
Compensation and Audit Committees
As we only have three board members and limited operations, we do not have separate or independent audit or compensation committees. Our Board of Directors has determined that it does not have an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K. In addition, we have not adopted any procedures by which our shareholders may recommend nominees to our Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of our Common Stock (collectively, the “Reporting Persons”) to report their ownership of and transactions in our Common Stock to the SEC. Copies of these reports are also required to be supplied to us. To our knowledge, during the fiscal year ended December 31, 2013 the Reporting Persons have not complied with all applicable Section 16(a) reporting requirements.
Code of Ethics
We have not adopted a Code of Ethics given our limited operations. We expect that we will be doing so at our earliest opportunity.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Executive compensation
To date, no compensation has been paid to any of our executives. We do not expect to establish employment agreements with our Canadian executives due to restrictions on citizens of foreign countries receiving compensation directly from companies in the United States. Rather, we will establish a Services Agreement with Champion Toronto so that Champion Toronto will provide the management services of our executives through Champion Toronto. Employment agreements and incentive programs will be established for executives who are citizens of the United States.
Compensation of Directors
To date, no compensation has been paid to any of our directors. In the future, we do not expect to compensate non-independent directors but we will consider compensation for any independent directors who are appointed.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information as of the date of this report regarding the number and percentage of our Common Stock (being our only voting securities) beneficially owned by each officer, director, each person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) known by us to own 5% or more of our Common Stock, and all officers and directors as a group.
(1)Applicable percentage of ownership is based on 45,000,000 shares of Common Stock outstanding as of the date of this Annual Report. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Note that affiliates are subject to Rule 144 and insider trading regulations. The percentage computation is for form purposes only .Messrs. Owen, Fishman and Schiller are the directors of Champion Care Corp. the record owner of 31,500,000 shares and as such, may be deemed to be the beneficial owners of the Champion Care Corp. Shares. Neither Champion Care Corp. nor the other individuals set forth herein, as of the date of this report, have filed reports on Schedule 13D.
Unless otherwise indicated, we have been advised that all individuals or entities listed have the sole power to vote and dispose of the number of shares set forth opposite their names. For purposes of computing the number and percentage of shares beneficially owned by a security holder, any shares which such person has the right to acquire within 60 days of the date of this report are deemed to be outstanding, but those shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other security holder. We currently do not maintain any equity compensation plans. We are not aware of any arrangements that could result in a change in control of the company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Exchange Agreement
On May 29th 2013, we entered into the Exchange Agreement with CPCC, a wholly owned subsidiary of Champion Toronto. Terrance Owen, Jack Fishman and Emil Schiller are the Directors and Executive Officers of both CPCC and Champion Toronto. On completion of the Exchange Agreement on October 18, 2013, Champion acquired a 70% interest in our company with the issuance of 31,500,000 our shares to Champion Toronto in exchange for 100% of the shares of CPCC which became our wholly owned subsidiary. Messrs. Owen, Fishman and Schiller also became Directors and Executive Officers of our company on October 18, 2013 as well.
Other material agreements
Champion license agreement
CPCC and Champion Toronto entered into a license agreement dated February 1, 2013, (“the License Agreement”) in which Champion Toronto provides CPCC with the exclusive rights to market and implement the Protocol in the United States (“the Territory”).
The material terms of the License Agreement area as follows.
Champion Toronto provides CPCC with the exclusive right to any of Champion Toronto’s knowhow and trademarks and the right to (i) enter into licensing, joint venture and acquisition agreements with clinics that provide pain management services under the direction of physicians who are properly licensed to practice medicine and qualified to treat patients using the Protocol in the Territory; (ii) establish pharmacies that will be within or associated with clinics acquired by Licensor as permitted by the regulations enforced by the applicable governments within the Territory; and (iii) take such steps that are deemed necessary to develop the business of pain management in the Territory.
The License Agreement is subject to the laws of Ontario, Canada and the initial term is five years with automatic renewals for new 5 year terms unless the agreement is otherwise terminated.
Champion Toronto was issued 10,000 shares of CPCC which were subsequently transferred to the Company pursuant to the terms of the Exchange Agreement. CPPC is entitled to a royalty of 10% of all Net Sales in the Territory meaning the amount of sales generated after the deduction of refunds, discounts, rebates and other reductions.
On completion of the Exchange Agreement, Champion Toronto, as our majority shareholder, would cause our Board of Directors to enter into a new license agreement containing standard representations and warranties as to royalties, remedies, termination, provisions for non-competition, non-solicitation, non-disclosure and ownership of developments, discoveries and new intellectual property and would cause the name of OICco to be changed to Champion Pain Care Corp.
Champion services agreement
CPCC and Champion Toronto entered into a services agreement dated February 1, 2013 with an effective date of December 1, 2012 (“the Service Agreement”) in which Champion Toronto agreed to provide management services to CPCC in exchange for fees and for reimbursement of the costs incurred by Champion Toronto.
The material terms of the Services Agreement area as follows.
●To assist CPCC with the implementation of the License Agreement, Champion Toronto has been or will be providing the following services and any other services to which the parties mutually agree.
●Provide training for the Protocol, for all of the Territory as defined in the License Agreement, through health care practitioners selected by Champion Toronto who are properly licensed to practice medicine and qualified to treat patients using the Protocol in the Territory.
●Establish ‘clinical excellence’ that will be within or associated with the clinics acquired by CPCC as permitted by the regulations enforced by the applicable governments within the Territory.
●Take any other actions that are required to develop the business of pain management in the Territory.
●Oversee all marketing activities for the Protocol in the Territory.
●Provide management for all administrative, financial, and technical matters.
●Oversee the public listing process for CPCC including, identifying a suitable public company vehicle, ensuring complete regulatory compliance, listing on the OTC Market and registration of the shares for trading.
The License Agreement is subject to the laws of Ontario, Canada and the initial term is five years.
The fee structure is as follows.
We expect that we will enter into a more comprehensive Services Agreement with Champion Toronto at the same time as we enter into a more comprehensive License Agreement.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
MaloneBailey, LLP is our independent registered public accounting firm.
Audit Fees
The aggregate fees billed by MaloneBailey, LLP for professional services rendered for the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q or services that are normally provided in connection with statutory and regulatory filings were $12,000 in 2013.
Audit-Related Fees
There were no fees billed by MaloneBailey LLP for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements for the fiscal year ended December 31, 2013.
Tax Fees
No fees were billed by MaloneBailey, LLP for professional services for tax compliance, tax advice, and tax planning for the fiscal year ended December 31, 2013.
There were no fees billed by MaloneBailey, LLP for other products and services for the fiscal year ended December 31, 2013.
Pre-Approval Policy
We do not currently have a standing audit committee. The above services were approved by our Board of Directors.
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Report:
3. Exhibits Incorporated by Reference or Filed with this Report.
Exhibit No. Description
31.1 Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.*
*Included herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: April 15, 2014
By: /s/ Terrance Owen
Terrance Owen, CEO
(Principal Executive Officer)
Date: April 15, 2014
By: /s/ Terrance Owen
Terrance Owen, CEO
(Principal Financial and Accounting Officer)
OICCO ACQUISITION I, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 2013
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
OICco Acquisition I, Inc.
(a development stage company)
New York, NY.
We have audited the accompanying consolidated balance sheet of OICco Acquisition I, Inc. and its subsidiary (a development stage company) (collectively, the “Company”) as of December 31, 2013, and the related consolidated statement of expenses, changes in stockholders’ deficit and cash flows for the period from January 31, 2013 (inception) through December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of OICco Acquisition I, Inc. and its subsidiary as of December 31, 2013, and the results of their consolidated operations and their cash flows for the period from January 31, 2013 (inception) through December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a working capital deficit and has incurred a net loss from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Malone Bailey, LLP
www.malonebailey.com
Houston, Texas
April 15, 2014
OICco Acquisition I, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
The accompanying notes are an integral part of these financial statements
OICco Acquisition I, Inc.
(A Development Stage Company)
Consolidated Statement of Expenses
For the period from January 31, 2013 (inception) through December 31, 2013
The accompanying notes are an integral part of these financial statements
OICco Acquisition I, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the period from January 31, 2013 (inception) through December 31, 2013
The accompanying notes are an integral part of these financial statements
OICco Acquisition I, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders’ Deficit
For the period from January 31, 2013 (inception) through December 31, 2013
The accompanying notes are an integral part of these financial statements
OICCO ACQUISITION I, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2013
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
OICco Acquisition I, Inc. (the Company) was incorporated under the laws of the State of Delaware on July 24, 2009.
On October 18, 2013, Champion Care Corp. (“Champion”) entered into a share exchange agreement with OICco Acquisition I, Inc. (the “Company”), a public shell company. Pursuant to the agreement, the Company acquired all of the outstanding shares of common stock of Champion Pain Care Corp.(“CPCC”), a Nevada corporation and a wholly owned subsidiary of Champion by issuing 31,500,000 shares of its common stock to Champion in exchange for all of the CPPC issued and outstanding shares. As a result of the share exchange, the Champion shareholders controlled approximately 70% of the issued and outstanding common shares of the Company resulting in a change in control. The transaction was accounted for as a reverse recapitalization transaction., as the Company qualified as a non-operating public shell company given the fact that it held nominal monetary assets, consisting of only cash at the time of merger transaction.
CPCC holds the rights in the United States to a proprietary pain management protocol, the Champion Pain Care Protocol (the “Protocol”) which was licensed from Champion Toronto. The Company intends to acquire private medical clinics throughout the United States that specialize in the treatment and management of chronic pain and add the Protocol to the treatments already provided by acquired clinics. The Company currently has limited operations and, in accordance with ASC 915 “Development Stage Entities,” is considered a Development Stage Company. The Company has been in the developmental stage since inception and has no operating history other than organizational matters.
The Company has elected a fiscal year end of December 31.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Related Parties
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Cash and Cash Equivalents
All highly liquid investments with maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of December 31, 2013.
Income Taxes
The Company accounts for income taxes under ASC 740 “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a Black-Scholes option pricing model, assuming maximum value, in accordance with ASC 815-15 “Derivative and Hedging” to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Beneficial Conversion Features
The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 820, “Fair Value Measurements and Disclosures.” FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
The Company does not have any assets or liabilities measured at fair value on a recurring basis at December 31, 2013. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the periods ended December 31, 2013.
Concentration of Credit Risks
Financial instruments that potentially subject the company to credit risk consist principally of cash and cash equivalents and receivables. The Company places its cash and cash equivalents with financial institutions. Deposits are insured to Federal Deposit Insurance Corp. limits. At December 31, 2013, there was no uninsured cash. Other financial instruments include notes payable and amounts due to related parties. Due to the short-term maturity of these obligations and the stated interest rates on notes payable, the carrying value of these instruments represent their fair value.
Earnings Per Share Information
FASB ASC 260, “Earnings Per Share” provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the period including stock warrants and options, using treasury stock method, and convertible preferred stock using the if-converted method. As there was a net loss for the period, basic and diluted loss per share is the same for the period from January 31, 2013 (inception) through December 31, 2013.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 2 - GOING CONCERN
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has minimal cash and no material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock or debt financing in order to implement its business plan. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern.
NOTE 3 - RELATED PARTY PAYABLE
As of December 31, 2013, the Company has payable of $689,358 to Champion Care Corp. of Toronto Canada for unpaid consulting fees and other general and administrative expenses. The Company is also required to pay monthly consulting fees of $10,000 to Champion Care Corp. of Toronto Canada.
NOTE 4 - CONVERTIBLE DEBENTURES
The Company issued two convertible debentures in principal balance of $22,690 and $25,000 through it’s subsidiary, CPCC. These notes have a one year term and bear interest at 5% per annum. The “$22,690 note” is convertible into shares of the Company’s common stock at a price of $0.20 per share. The “$25,000 note” is convertible into shares of the Company’s common stock at a 25% discount to the closing market price of the Company shares on the day the Company shares first trade. As of December 31, 2013, neither of these two notes was converted.
The Company analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible Securities with Beneficial Conversion Features” and noted none.
The Company also analyzed the conversion option for derivative accounting under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The embedded conversion feature was measured at fair value at the date of inception and at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings. Since the Company common stock doesn’t have a trading market during the period from inception to December 31, 2013, and in addition the Company is in a development stage with nominal assets and no revenue to date, the Company determined the stock is worth nil. As a result, the derivative liability is valued at zero.
NOTE 5 - REVERSE MERGER
The authorized common stock of the Company consists of 100,000,000 shares with a $0.0001 par value.
On October 18, 2013, Champion Care Corp. (“Champion”) entered into a share exchange agreement with OICco Acquisition I, Inc. (the “Company”), a public shell company. Pursuant to the agreement, the Company acquired all of the outstanding shares of common stock of Champion Pain Care Corp.(“CPCC”), a Nevada corporation and a wholly owned subsidiary of Champion by issuing 31,500,000 shares of its common stock to Champion in exchange for all of the CPPC issued and outstanding shares. As a result of the share exchange, the Champion shareholders controlled approximately 70% of the issued and outstanding common shares of the Company resulting in a change in control.
On October 18, 2013, the Company had 13,500,000 common shares outstanding.
For accounting purposes, this transaction is being accounted for as a reverse merger and has been treated as a recapitalization of OICco Acquisition I, Inc., with CPCC considered the accounting acquirer, and the financial statements of the accounting acquirer became the financial statements of the registrant. The Company did not recognize goodwill or any intangible assets in connection with the transaction. The 31,500,000 shares issued to the shareholders of CPCC in conjunction with the share exchange transaction have been presented as outstanding for all periods. The historical consolidated financial statements include the operations of the accounting acquirer for all periods presented and net assets of ($37,037) was recorded as reverse merger adjustment.
NOTE 6 - INCOME TAXES
The Company uses the liability method, where deferred tax and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.
From inception through December 31, 2013, the Company incurred a net loss, and, therefore, had no tax liability. The net deferred asset generated by the loss carry forward has been fully reserved. The cumulative net operating loss carry forward is approximately $92,457 as of December 31, 2013 and will expire in year 2033.
Deferred tax assets consist of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.
As of December 31, 2013, deferred tax assets consisted of the following: