U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

x          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2016

 

o          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
               For the transition period from   _______ to _______

 

Commission File No.  333-162084

 

Champion Pain Care Corporation

(Name of Registrant in its Charter)

Delaware	27-0625383
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer I.D. No.)

 

48 Wall Street, 10th Floor, New York, NY 10005

   (Address of principal executive offices)

  1-877-966-0311

  (Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). xYes o No

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

 

Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o	Smaller reporting company x

 

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

 APPLICABLE ONLY TO CORPORATE ISSUERS:

 

As of November 17, 2016, the registrant had 121,813,500 issued and outstanding shares of common stock.

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Champion Pain Care Corporation

 

TABLE OF CONTENTS

 

PART I.     FINANCIAL INFORMATION	PAGE
Item 1.  Financial Statements:	4
Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015 (Unaudited)	4
Consolidated Statements of Expenses for the three and nine months ended September 30, 2016 and 2015 (Unaudited)	5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (Unaudited)	6
Notes to Unaudited Consolidated Financial Statements	7
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	14
Item 4T.  Controls and Procedures	14
PART II.     OTHER INFORMATION	15
Item 1.  Legal Proceedings	15
Item 1A. Risk Factors	15
Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds	28
Item 3.   Defaults upon Senior Securities	28
Item 4.   Mine Safety Disclosures	28
Item 5.   Other Information	28
Item 6.   Exhibits	28
Signatures	29

 

 

 

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CHAMPION PAIN CARE CORPORATION

 

FINANCIAL STATEMENTS

September 30, 2016

INDEX

 

		Page
Unaudited Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015.		5
Unaudited Consolidated Statements of Expenses for the three and nine months ended September 30, 2016 and 2015.		6
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015.		7
Notes to the Unaudited Consolidated Financial Statements		8

 

 

 

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PART I - FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS

The accompanying notes are an integral part of these unaudited consolidated financial statements

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Champion Pain Care Corporation

Consolidated Statements of Expenses

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements

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Champion Pain Care Corporation

Consolidated Statement of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements

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CHAMPION PAIN CARE CORPORATION

Notes to Unaudited Financial Statements

September 30, 2016

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF BASIS OF PRESENTATION

Nature of Business

Champion Pain Care Corporation (“we”, “our”, the “Company”) was incorporated under the laws of the State of Delaware on July 24, 2009 as OICco Acquisition I, Inc. On October 31, 2014, the Company changed its name to Champion Pain Care Corporation as disclosed in a Form 8-K filed on the SEC website on November 10, 2014.

On October 18, 2013, Champion Care Corp. of Toronto, Canada (“Champion Toronto”), entered into a share exchange agreement with 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 Toronto by issuing 31,500,000 shares of its common stock to Champion Toronto in exchange for all of the CPCC issued and outstanding shares. As a result of the share exchange, Champion Toronto 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.

The Company and CPCC hold 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 has elected a fiscal year end of December 31.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared on the basis that the Company will continue as a going concern in accordance with accounting principles generally accepted in the United States for interim financial statements and do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading.  These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s 10K for the calendar year ended December 31, 2015. The results of operations presented in the accompanying interim financial statements for the three and nine months ended September 30, 2016 are not necessarily indicative of the operating results that may be expected for the full year ending December 31, 2016.

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.  As of September 30, 2016, the Company had $5,287 in cash but no other 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.

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NOTE 3 – RELATED PARTY PAYABLES

As of September 30, 2016, the Company had related party payables of $2,333,521 which included $1,777,438 to related parties for unpaid consulting fees and other general and administrative expenses and $540,833 for deferred salaries. As of December 31, 2015, the Company had related party payables of $1,841,130 which included $1,570,047 to related parties for unpaid consulting fees and other general and administrative expenses and $255,833 for deferred salaries. The related parties are Champion Toronto, Terrance Owen, CFO and Director, a company owned by Terrance Owen and Nanotech Systems, Inc., a company for which Terrance Owen is also the CEO and a Director. The deferred salaries are payable to Garland A. Brown, Jr., CEO, and Mark Conner, COO.

In addition, a non-interest bearing loan of $15,250, payable on demand, was provided to CPCC on October 6, 2014, by Terrance Owen. As of September 30, 2016, this loan had not been repaid.

As disclosed below in Note 4 to these financial statements, we entered into an agreement with Mark H. Conner, COO of the Company, for funding of $25,000.

NOTE 4 – REDEEMABLE COMMON STOCK

We entered into agreements (the “Agreements”) for funding of $25,000 with Mark H. Conner, COO of the Company, on April 5, 2016 and for $12,500 and $10,000 on April 5, 2016, and May 24, 2016, respectively, to independent investors who are acquaintances of Mr. Conner (the “Investors”). The funds invested under the Agreements are considered to be mezzanine equity since the funds invested are payable one year after the execution date of the Agreements at the sole discretion of the Investors and shall bear interest at a rate of 12% per annum on any unpaid balance that remains after the date that repayment is requested. The parties have agreed, understand, and acknowledge that Holders have received an aggregate of 2,375,000 Common Shares of the Company at a price of $0.02 per share (the “Stock”) on the execution date of the Agreements and that the Investors may only request repayment of the funds invested upon returning all of the Stock to the Company prior to such exercise.

NOTE 5 – LOAN PAYABLE

On June 18, 2015, the Company accepted a non-interest bearing loan of $100,000, payable on demand from a third party who is a business acquaintance of the CEO. As of September 30, 2016, the loan had not been repaid.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2015 which was filed with the SEC on April 14, 2016.

Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. In this Quarterly Report on Form 10-Q, words such as “may,” “expect,” “anticipate,” “estimate,” “intend,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A, “Risk Factors.”

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

We intend to acquire equity ownership or assets of medical clinics that specialize in the treatment and management of chronic pain.

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 have not yet had to actively seek 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 structures 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.

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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 risks. Physicians may have personal attachments to their clinics and overvalue them. Accounting records, which generally do not adhere to Generally Accepted Accounting Principles (“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 Commission on Accreditation of Rehabilitation Facilities (“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 those costs. 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 is being undertaken by, or under the supervision of, our executives who are not professional business analysts. To assist management with acquisitions, we are engaging 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 are concentrating on identification of preliminary prospective business opportunities which are being 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 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 conduct site visits and meet personally with the owners, physicians, management and key personnel of each clinic that we have an executed MOU with and, to the extent possible, require written reports. We will attempt not to 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 close on an acquisition only after the negotiation and execution of definitive 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.

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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 filing requirements to be filed with the Securities and Exchange Commission upon consummation of a merger or acquisition. 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

To date we have not generated any revenues and do not anticipate generating revenues until we close on the acquisition of at least one clinic or license the Protocol.   Because of the numerous risks and uncertainties associated with the acquisition of clinics, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from the clinics whose acquisitions we are actively pursuing or from licensing the Protocol, we may nevertheless fail to become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.

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

Through the periods ended September 30, 2016 and 2015, our operations mainly consisted of seeking clinics for acquisition, preparing financial projections and acquisition agreements and pursuing funding.  We are showing a loss of $187,959 and $569,431 for the three and nine months ended September 30, 2016, respectively, compared to $202,787 and $5,624,551 for the three and nine months ended September 30, 2015, respectively. On September 30, 2016 we had assets of $5,287 in cash, liabilities of $2,516,752 and a stockholders’ deficit of $2,558,965 compared to assets of $27,764 in cash, liabilities of $2,017,298 and a stockholders’ deficit of $1,989,534 on December 31, 2015.

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Quarter Ended September 30, 2016 Compared to Quarter Ended September 30, 2015.

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 & Net Loss

For the quarter ended September 30, 2016 we had operating expenses and a net loss of $187,959. The main expenses consisted of $19,180 for accounting, legal, filing and investment banking fees, $95,000 for deferred salaries, $72,720 for fees due under the Services Agreement between the Company and Champion Toronto which included Champion Toronto working with us in evaluating acquisition prospects, negotiating with medical clinics, due diligence investigations of those medical clinics, preparing marketing materials and financial projections for prospective investors, participating in discussions with prospective investors and fulfilling our general administrative requirements.

For the quarter ended September 30, 2015 we had operating losses and a net loss of $202,787. The main expenses consisted of $11,280 for accounting, legal and filing fees, $110,833 for deferred salaries, $9,894 to identify, visit and evaluate acquisition prospects and $64,500 for fees due under the Services Agreement between the Company and Champion Toronto for the services described above.

No interest costs were accrued during the quarters ended September 30, 2016 and 2015, respectively.

Nine months Ended September 30, 2016 Compared to the nine months ended September 30, 2015

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 & Net Loss

For the nine months ended September 30, 2016, we had operating losses and net losses of $569,431 compared to operating losses of $3,044,551 and net losses of $5,624,551 for the nine months ended September 30, 2015.

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The reasons for the greater losses for the nine months ended on September 30, 2015 compared to the same period for 2016 were as follows.

·

One-time Stock Based Compensation costs of $2,358,950 were realized for a total 32,550,000 shares that we issued.

·

10,000,000 shares were issued to each of the CEO and COO who were appointed on June 19, 2015 under the terms of their Executive Employment Agreements (attached as Exhibits 10.9 and 10.10, respectively, to the Form 8-K filed by the company on June 15, 2015);

·

12,500,000 shares to CGPM, LLC under the terms of the Consulting Agreement between the Company and CGPM (attached as Exhibit 10.8 to the Form 8-K filed by the company on May 7, 2015) and 50,000 shares issued in settlement of a claim for legal services.

·

We also issued 40,000,000 shares to Champion Toronto in partial payment for services rendered under the Services Agreement in place between the Company and Champion Toronto and recognized a loss of $2,580,000 which was the difference between the market price of the shares and the deemed value of $0.005 per share.

Other expenses for the nine months ended September 30, 2016 were $51,608 for accounting, legal, filing and investment banking fees, $285,000 for deferred salaries, $13,311 to identify and evaluate acquisition prospects and $215,690 for fees due under the Services Agreement between the Company and Champion Toronto. The corresponding expenses for the nine months ended September 30, 2015 were $54,927 for accounting, legal and filing fees, $110,833 for deferred salaries, $29,177 to identify and evaluate acquisition prospects and $629,230 for fees due under the Services Agreement between the Company and Champion Toronto. The lower expense for the fees payable to Champion Toronto for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 were due to an amendment to the Services Agreement that came into effect on June 19, 2015 and was attached as Exhibit 10.13 to the Form 8-K filed by the company on June 15, 2015. As a result of the incumbent CEO and COO resigning to accommodate the appointment of the current CEO and COO, the fee structure was changed so that any fees paid to Champion Toronto for the resigned executives were at a hourly rate for any services rendered rather than a fixed amount. This has resulted in lower fees being accrued by Champion Toronto.

Liquidity and Capital Resources

Cash and cash equivalents at September 30, 2016 were $5,287 compared to $27,764 as of December 31, 2015. As of September 30, 2016 we had stockholders’ deficit of $2,558,965 compared to $1,989,534 for the year ended December 31, 2015.

No warrants or options have been issued as September 30, 2016.

We are actively looking for either equity and/or debt financing to settle our current and future liabilities and to accomplish our business 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 September 30, 2016.

Off-Balance Sheet Arrangements

As of September 30, 2016, we are not aware of any off-balance sheet transactions requiring disclosure.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of changes in the value of market risk sensitive instruments caused by fluctuations in interest rates, foreign exchange rates and commodity prices. Changes in these factors could cause fluctuations in our results of operations and cash flows.

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined by Rule 13-15(e) of the 34 Act under the supervision and with the participation of the CFO. Based on and as of the date of such evaluation, our CFO has concluded that the Company’s disclosure controls and procedures were not effective.

The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in disclosure controls and procedures which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment as the Company has just three officers with no additional employees; (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC Guidelines; and (iii) inadequate security and restricted access to computer systems including insufficient disaster recovery plans; and (iv) no written whistleblower policy. In the near future, our CFO plans to implement appropriate disclosure controls and procedures to remediate these material weaknesses, including (i) appointing additional qualified personnel to address inadequate segregation of duties and ineffective risk management; (ii) adopt sufficient written policies and procedures for accounting and financial reporting and a whistle blower policy once funds are available; and (iii) implement sufficient security and restricted access measures regarding our computer systems and implement a disaster recovery plan.

 

Changes in Internal Controls

During the quarter ended September 30, 2016, there have been no significant changes in the Company’s internal controls as such term defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the 34 Act or in other factors that could significantly affect these controls as of the end of the period covered by the report and up to the filing date of this Quarterly Report on Form 10-Q. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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PART II - OTHER INFORMATION

  

ITEM 1.    LEGAL PROCEEDINGS

  

As of the date of this report, we are not engaged in any legal proceedings.  However, in the future, we may become involved in various lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may have an adverse effect on our business, financial conditions or operating results. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

ITEM 1A. RISK FACTORS.

The following risk factors and other information included in this Annual Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business We refer you to our the cautionary statements regarding forward-looking statements set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations which identifies certain forward-looking statements contained in this report that are qualified by these risk factors. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

Although we have not yet acquired any clinics or licensed the Protocol, the following risk factors are expected to affect our business and the industry in which we will 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 pursuing acquisition of pain care clinics 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, financial condition and results of operations.

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We are a presently a holding company that will, unless we make acquisitions at the parent level, 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 presently a holding company with no material assets other than our ownership interests in our wholly-owned subsidiary for which we have no present plans. We expect to rely on dividends, advances, or other such distributions, from our clinics for our cash needs to service any debt we may incur and to pay our operating expenses. 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 the agreements between us and the acquired clinic. We cannot provide any assurance that any distribution of funds to us will be adequate to satisfy our liquidity needs, and if we are not able to obtain sufficient funds 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:

·

Obtain financing to enable us to buy clinics,

·

enter into acquisition agreements with clinics we have outstanding MOUs with as well as other clinics that 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.

In the event we are unable to successfully implement our business strategy or if we invest resources in a strategy that ultimately proves unsuccessful, our operating results will be adversely affected.

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 two of which are subject to outstanding MOUs 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 continue 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.

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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, such as high unemployment rates, higher co-pays 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.

If we close on the acquisition of the clinics we are pursuing we nevertheless may not be able to successfully integrate their operations with our then existing clinics 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 existing clinics 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 will seek to finance future clinic acquisitions and development projects through debt or equity financings of which there can be no assurance. 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 further implement and develop 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 possibly overpay 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.

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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 our 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 intend 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. In the future, we intend to strengthen our IP protection options in due course with 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.

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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 effect 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.

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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.

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.

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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 9^th revision of the ICD (“ICD-9”) describes approximately 14,000 procedures, while the 10^th 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-10 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.

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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.

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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.

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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.

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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;

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create the substantial likelihood that cash distributions from limited liability companies to the affiliated physicians will be illegal; or

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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 presently a market for our common stock, if an active market develops, the market price of our common stock may nevertheless fluctuate widely in response to various factors, some of which are beyond our control, including:

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market conditions or trends in the healthcare industry or in the economy as a whole;

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actions by competitors;

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actual or anticipated growth rates relative to our competitors;

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the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

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economic, legal and regulatory factors unrelated to our performance;

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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;

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litigation;

·

changes in key personnel; and

·

future sales of our common stock by our officers, directors and significant shareholders.

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In addition, the over-the-counter markets in which our common stock is being quoted, have experienced, at times, 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. 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.

Our common stock may lack a significant trading market, which could make it more difficult for an investor to sell our common stock.

 

While we are approved for trading by the Financial Industry Regulatory Authority (“FINRA”) with the symbol CPAI and our shares have traded 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:

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that a broker or dealer approve a person’s account for transactions in penny stocks; and

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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.

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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 500,000,000 shares. As of date of this report on Form 10-Q, there were 121,813,500 shares of our common stock outstanding. Although we have no commitments as of the date of this report to issue additional 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 shareholders have significant control over our common stock and may be able to control our Company indefinitely.

Our largest shareholders currently have beneficial ownership of approximately 78% 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.

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ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

 

None.

ITEM 4.   MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.    OTHER INFORMATION

None.

ITEM 6.    EXHIBITS

 

The following exhibits are filed herewith:

Exhibit Number	Exhibit Description
31.1	Certification of the CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the CEO and CFO pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

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SIGNATURES

 

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

	Champion Pain Care Corporation
Date:           November 17, 2016	By:	/s/ Garland A. Brown, Jr.
		CEO &Director

Date:           November 17, 2016	By:	/s/ Terrance Owen
		CFO & Director

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