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Financial report summary
?Risks
- Risks Relating to Liquidity
- Our liquidity position raises substantial doubt about our ability to continue as a going concern.
- We may be unable to generate sufficient cash and may be required to take other actions, which may not be successful, to satisfy our obligations.
- We have outstanding indebtedness and may incur additional debt in the future.
- Certain of our borrowings and other obligations are based upon variable rates of interest, which could result in higher expense in the event of increases in interest rates.
- Our outstanding indebtedness and our Series A Senior Preferred Stock contains covenants that may limit certain operating and financial decisions. Non-compliance with these covenants may result in the acceleration of our indebtedness which could lead to bankruptcy, reorganization or insolvency.
- We depend upon governmental payors through Medicare and Medicaid reimbursement and decreases in Medicare reimbursement rates may adversely affect our financial results.
- We anticipate the federal and state governments to continue their efforts to contain growth in Medicaid expenditures, which could adversely affect our revenue and profitability.
- Payments we receive from Medicare and Medicaid are subject to potential retroactive reduction.
- We depend upon reimbursement by third-party payors.
- If payments from workers’ compensation payors are reduced or eliminated, our revenue and profitability could be adversely affected.
- Our payor contracts are subject to renegotiation or termination, which could result in a decrease in our revenue or profits.
- Billing disputes with third-party payors may decrease realized revenue and may lead to requests for recoupment of past amounts paid.
- We are subject to risks associated with public health crises and epidemics / pandemics, such as COVID-19.
- We are subject to increases in the cost inflation necessary for the provision of our services and we may not be able to fully offset this cost inflation on a timely basis or at all.
- We operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition and results of operations may be harmed.
- Rapid technological change presents us with significant risks and challenges.
- Inability to maintain high levels of service and patient satisfaction could adversely affect our business.
- Our current locations may become unattractive, and attractive new locations may not be available for a reasonable price, if at all, which could adversely affect our business.
- We may continue to close clinics and incur closure costs and losses.
- We may determine to sell one or more of our clinics, and any such divestiture could adversely affect our continuing business.
- Our ability to generate revenue is highly sensitive to the strength of the economies in which we operate and the demographics and populations of the local communities that we serve.
- Risks Relating to Our Operations
- We depend upon the cultivation and maintenance of relationships with the physicians and other referral sources in our markets.
- The impacts of weather, natural disasters, climate change and other catastrophic events may adversely affect our revenues and results of operations.
- Future acquisitions may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities.
- Failure of our third-party customer service and technical support providers to adequately address customers’ requests could harm our business and adversely affect our financial results.
- Our systems infrastructure may not adequately support our operations.
- Failure by us to maintain financial controls and processes over billing and collections or disputes with third-parties could have a significant negative impact on our financial condition and results of operations.
- Legal and Regulatory Risks Relating to Our Business
- In conducting our business, we are required to comply with applicable state laws regarding fee-splitting and professional corporation laws.
- We face inspections, reviews, audits and investigations under federal and state government programs and payor contracts. These audits could have adverse findings that may negatively affect our business, including our results of operations, liquidity, financial condition and reputation.
- Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable information.
- Our business may be adversely impacted by healthcare reform efforts, including repeal of or significant modifications to the ACA.
- Our failure to comply with labor and employment laws could result in monetary fines and penalties.
- We have been and may continue to be involved in legal proceedings; damage to our reputation or our failure to adequately insure against losses, including from substantial claims and litigation, could have an adverse impact on our operations, financial condition or prospects.
- Risks Relating to Our Human Resources
- Our facilities face competition for experienced physical therapists and other clinical providers and clinical staff that may increase labor costs and reduce profitability.
- Our ability to attract and retain talented executives and corporate employees.
- Our share-based compensation incentives may not be effective in attracting, retaining and motivating key personnel and employees.
- We face licensing and credentialing barriers, and associated variability across states is a risk to timely delivery of productive talent.
- Risks Relating to Our Information Technology
- We rely on information technology in critical areas of our operations, and a disruption relating to such technology could harm our financial condition.
- We use software vendors and network and cloud providers in our business and if they cannot deliver or perform as expected or if our relationships with them are terminated or otherwise change, it could have a material adverse effect on our business, financial condition and results of operations.
- We are a target of attempted cyber and other security threats and must continuously monitor and develop our IT networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact or which may cause a violation of HIPAA or HITECH and subject us to potential legal and reputational harm.
- Risks Relating to Our Accounting and Financial Policies
- We currently outsource, and from time to time in the future may outsource, a portion of our internal business functions to third-party providers. Outsourcing these functions has significant risks, and our failure to manage these risks successfully could materially adversely affect our business, results of operations and financial condition.
- If our estimates or judgments relating to our accounting policies prove to be incorrect, our results of operations could be adversely affected.
- The 2L Notes are accounted for as liabilities at fair value and the changes in value could have a material effect on our financial results.
- The IPO Warrants are accounted for as liabilities and the changes in value of the IPO Warrants could have a material effect on our financial results.
- The Earnout Shares and Vesting Shares are accounted for as liabilities and the changes in value of these shares could have a material effect on our financial results.
- Impairments of our goodwill or other intangible assets may be material and have a material adverse effect on our business, financial condition, and results of operations.
- Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
- If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, this may result in material misstatements of our consolidated financial statements or failure to meet our periodic reporting obligations.
- Risks Relating to Ownership of Our Common Stock
- Our stock price and trading volume may be volatile, which could result in rapid and substantial losses for our stockholders, who may lose all or part of their investment.
- Because there are no current plans to pay cash dividends on our common stock for the foreseeable future, you are unlikely to receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.
- If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.
- We are a smaller reporting company and a non-accelerated filer, and the reduced disclosure requirements available to us may make our common stock less attractive to investors.
- Future issuances or sales, or the perception of future issuances or sales, by us or our stockholders of common stock or other voting securities or securities convertible into or exchangeable for our common stock in the public market or otherwise could cause the market price for our common stock to decline.
- The 2L Notes are convertible into common stock, and the conversion of our 2L Notes into common stock would dilute the ownership interest of our existing stockholders and may adversely affect our stock price.
- The Series B Preferred Stock stapled to the 2L Notes provide voting rights which will dilute the voting interests of our existing stockholders.
- If we are unable to maintain compliance with NYSE listing standards, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.
- Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
- Our Amended and Restated Bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
- The Preferred Equityholders as a group have significant influence over us.
- If the Series A Senior Preferred Stock were to be redeemed, it may not be economically favorable to the Company and may lead to material adverse consequences for the Company and its other stakeholders.
- There is currently no market for our Series I Warrants and Series II Warrants and a market for our Series I Warrants and Series II Warrants may not develop, which would adversely affect the liquidity and price of our Series I Warrants and Series II Warrants.
Management Discussion
- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
- We make statements in this discussion that are forward-looking and involve risks and uncertainties. These statements contain forward-looking information relating to the financial condition, results of operations, plans, objectives, future performance and business of the Company. The forward-looking statements are based on our current views and assumptions, and actual results could differ materially from those anticipated in such forward-looking statements due to factors including, but not limited to, those discussed under “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A. “Risk Factors.”
- Many factors are beyond our control. Given these uncertainties, you should not place undue reliance on our forward-looking statements. Our forward-looking statements represent our estimates and assumptions only as of the date of this Annual Report. Except as required by law, we are under no obligation to update any forward-looking statement, regardless of the reason the statement may no longer be accurate.